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Client Alert: Recent Guidance Provides Extensions of COBRA Notice, Election, and Premium Payment Deadlines

On May 4, 2020, the Internal Revenue Service and Employee Benefits Security Administration of the Department of Labor jointly published guidance extending a number of employer deadlines for notices and claims under employer-provided retirement and welfare plans.  Most relevant to many employers will be the extensions applicable to COBRA continuation of coverage requirements.

Currently, a qualified beneficiary[1] of COBRA coverage has 60 days from the loss of coverage and notification of the right to continue coverage to elect to continue coverage.  The qualified beneficiary then has an additional 45 days to pay the premiums retroactive to the first day of continuation coverage.  In addition, a qualified beneficiary is required to notify the plan administrator (typically the employer sponsoring the health plan) within 60 days of the date of divorce or the date a dependent child ceases to be a dependent child for purposes of coverage under the group health plan.

The updated rules for the timing of COBRA elections and premium payments extend the deadlines until 60 days after the announced end of the National Emergency.  The extension applies for elections made beginning March 1, 2020.  The apparent purpose of the extension is to minimize the possibility of individuals losing employer-provided health insurance due to the existing COBRA election time frames.

The deadline for administrators of health insurance plans (typically the sponsoring employer) to notify qualified beneficiaries of the right to continue coverage is also extended.

Example:  Assume that the National Emergency is declared to end on May 10.  Sixty days from May 10 is July 9.

Jane Smith works for Acme Company and participates in Acme Company’s group health plan. Ms. Smith experiences a qualifying event for COBRA purposes as a result of a reduction of hours below the hours necessary to meet the group health plan’s eligibility requirements. Ms. Smith loses coverage on March 31, 2020. Ms. Smith is provided a COBRA election notice on April 1, 2020. What is the deadline for Ms. Smith to elect COBRA?

Ms. Smith is eligible to elect COBRA coverage under Acme Company’s group health plan. The last day of Ms. Smith’s COBRA election period is 60 days after July 9, 2020, or September 7, 2020.  Ms. Smith then has 45 days following her election to pay her premiums retroactive to April 1, 2020, if she wants to continue coverage for the period from April until September, 2020.

Remember that, during the period of time a COBRA election is pending, the plan is required to represent that the qualified beneficiary is covered due to a future right to elect COBRA coverage.  This means that the qualified beneficiary could receive medical care, then be subject to the claims of the providers if he or she does not pay the retroactive premiums when due and the insurance is retroactively cancelled back to the date of the loss of coverage.

Note that the employers’ deadline for providing COBRA notices is also extended until after the declared end of the National Emergency.  Unless the employer sends the COBRA notices as a matter of course, without regard to the extended deadline, many qualified beneficiaries will be unaware of their rights to continue coverage possibly causing them not to seek needed medical treatment.

Questions remain that hopefully will be addressed by future guidance, such as:
 

• Do notices and elections that were sent to qualified beneficiaries between March 1, 2020 and May 4, 2020 need to be reissued with the extended deadlines noted?   Will subsequent notices be required when the National Emergency is declared to be over?
• Will deadlines for individuals to elect to participate in the federal Health Insurance Marketplace be impacted by the extended COBRA deadlines?

This information will be updated when additional guidance is available.