Group Health Plan Advisory (COVID-19): COBRA and HIPAA Deadlines Extended
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New Cobra Model Notices
On April 29, 2020, the Departments of Labor (DOL) and Treasury (IRS) jointly issued a final rule extending several specific notice time frames applicable under HIPAA, COBRA, and ERISA. The rule also extends the time frames for COBRA elections, COBRA payments, and HIPAA special enrollments. In addition to the final rule, the DOL issued Disaster Relief Notice 2020-01, indicating there will be leniency regarding enforcement of the timing and delivery method for all disclosures required under ERISA and confirming the extended filing deadline of July 15, 2020, for Form 5500 and Form M-1 filings due between April 1 and July 15.
In addition to the above changes, on May 1, 2020, the Department of Labor issued FAQ’s relating to COBRA, and new COBRA Model General and Election Notices. Significantly, the FAQs and new model notices include information about the interplay between COBRA and Medicare.
Oswald’s InsureOne Benefits team can help employers and any terminated employees losing their participation in their employer’s group health plan with one-on-one counseling helping to determine the best health care option.
SUMMARY of April 29 Final Rule:
The period of time from March 1, 2020, until 60 days after the National Emergency is over is referred to as the “Outbreak Period.” All group health plans, disability plans, and other employee welfare benefit plans must disregard this time period when administering plans and allowing plan participants to exercise certain rights. For example, A COBRA qualified beneficiary (QB) who is provided a COBRA notice today will have 60 days from the end of the Outbreak Period to elect COBRA.
COBRA Claims Appeals
Time frames for claims appeals are also extended, but most employers rely on their carrier or TPA to administer claims appeals, so this will have a less direct effect on employers. The biggest impact on employers will be that the rules extend the time frames for COBRA elections, COBRA payments, and HIPAA special enrollments. These extensions raise several administrative concerns and will increase the risk of anti-selection in employer sponsored plans.
HIPAA Special Enrollment Rights and COBRA Elections and Payments
Employees who want to exercise HIPAA special enrollment rights normally have 30 or 60 days (depending on the event) to notify the employer of the HIPAA special enrollment event. The extension of notice timelines means that eligible employees would be able to request a HIPAA special enrollment for a much longer period of time than normally allowed, and the health plan would be required to allow a mid-plan year enrollment for eligible participants.
The extension also applies to a number of COBRA requirements. Regular COBRA rules include the following and other COBRA deadlines:
- Qualified beneficiaries (QBs) must be given at least 60 days to elect COBRA continuation coverage and 45 days from the date of electing COBRA to make the first premium payment.
- A 30-day grace period must be provided for subsequent COBRA premium payments before COBRA can be terminated for non-payment.
The extension of COBRA election and payment timelines means that eligible QBs would be able to wait to elect COBRA for a longer period than is normally allowed. Additionally, employers will not be allowed to terminate COBRA coverage for extended periods of time.
Open Issues and Unintended Consequences
There are many unanswered questions and potential negative impacts on health plans that are not addressed by the rules regarding the extension of deadlines. The ability to wait to elect COBRA coverage or delay payments for months will increase employers’ exposure to adverse selection.
Q: If COBRA coverage cannot be terminated for non-payments for months, does the employer have to notify the QB after the normal grace period that they are not being canceled, and that they have extra time to pay?
Q: What if the QB does not pay because they want their COBRA coverage canceled and the employer keeps the coverage in force? QBs rarely tell the employer they want COBRA canceled-they simply stop paying the COBRA premiums.
Q: What if the Emergency extends for months (to July 31, for example)? If a QB makes no COBRA payments for 6 months March–August, and the employer does not cancel coverage until October, the QB would owe 6 months’ COBRA premium. If they do not pay, will the carrier retroactively term coverage back to March 1? What about the premiums the employer paid for those 6 months—will the carrier refund the employer premium payments?
Q: Employers are experiencing a huge number of COBRA events right now due to furloughs and termination of employment. Do employers have to resend COBRA notices telling QBs they do not have to elect for a long, long, time?
Q: What if the Emergency lasts until July 31? I terminate employee now and offer COBRA…they can wait to elect until sometime in October and expect me to retroactively cover them back to May 1st! Hospitals and lawyers will learn about this one, and we can expect a bunch of COBRA elections later this year for everybody that gets hit by a bus over the next few months!
Q: Current COBRA rules allow a QB to revoke a waiver of COBRA coverage during the 60-day election period. If an individual affirmatively waives COBRA, can they revoke that waiver any time through the end of the Outbreak Period?
Additional guidance on these extension rules is expected and Oswald will notify you as soon as we know more.
Please contact your Oswald client team representative for further information.
Disclaimer: Materials are solely for informational purposes as an educational resource. Please contact counsel to obtain advice with respect to any specific issue.