During the economic instability surrounding the COVID-19 pandemic, terminated or furloughed employees should understand some new federal regulations governing COBRA continuation.
What Hasn’t Changed
If you were enrolled in group medical, dental or vision benefits sponsored by a COBRA-subject employer (addressed later) and lost eligibility for that coverage (through termination, loss of hours, etc.), you could continue your enrollment in your employer’s coverage for between 18 and 36 months (depending on the reason for your loss of eligibility) at your own cost.
How Things Used To Be
Your employer, or the Third-Party Administrator handling COBRA notifications, would notify you of your COBRA eligibility within 14 days of the end of your coverage. You then had 60 days to respond and elect COBRA coverage, effective back to the date you lost coverage as an active employee. You then had a further 45 days to make the first premium payment; if you made no payment, the coverage would be terminated back to the date you originally lost coverage.
Example: John is furloughed on March 20; his employee coverage lasts until March 31. His employer sends him a COBRA election notice, which he receives on April 7. John has until June 6 (60 days) to elect to continue his coverage, which will be reinstated back to April 1. John then has until July 21 (another 45 days) to make his first premium payment; if he doesn’t pay, the continuation coverage will be canceled back to April 1.
How Things Are Now
In reaction to the pandemic, the IRS and Department of Labor have released new joint guidance:
COBRA deadlines for both election and payment are frozen for the duration of the “outbreak period,” which began on March 1, 2020, and will last until 60 days after the declared COVID-19 National Emergency ends.
Example: John is furloughed on March 20; his employee coverage lasts until March 31. His employer sends him a COBRA election notice, which he receives on April 7. John has until 60 days until after the COVID-19 National Emergency ends, plus another 60 days for the normal deadline, to elect COBRA; his coverage would be effective back to the date his coverage as an active employee ended. He then has a further 45 days to make the first payment premium.
Of course, John could also elect COBRA at any time during that outbreak period. His deadline for first premium payment would be pushed out until 165 days after the COVID-19 National Emergency ends (60 + 60 + 45).
Things To Watch For
- Premium payments beyond the initial payment are considered timely if they are made within 30 days of when they are first due, which is the date on which the initial payment is made. So, conceivably, a COBRA enrollee would then be billed for several months of COBRA coverage all at once.
- These IRS/DOL regulations apply to COBRA-subject employers: private-sector employers with 20 or more employees on more than 50% of business days in the previous calendar year. Employers too small to be subject to COBRA may still be subject to individual states’ continuation regulations, often called “mini-COBRA.”
- If the COVID-19 National Emergency lasts long enough that the deadlines above overlap with Open Enrollment for the individual insurance market, further guidance will be needed from the IRS and Department of Labor to determine how continued COBRA eligibility affects an individual’s eligibility for Advanced Premium Tax Credits (the healthcare.gov subsidy).
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Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak
EBSA Disaster Relief Notice 2020-01