The Coronavirus Pandemic Has Implications for Your COBRA Administration
The country is consumed with news of the spread of COVID-19, known as coronavirus. This has caused widespread concern for individuals, employers, and communities across the world. As employers try to manage the impact of coronavirus on their employees, several workplace-related issues arise.
These issues include questions of remote working, self-quarantines (whether voluntary or mandatory), and modified leave-of-absence policies. The economic effects of coronavirus fears may even result in closed businesses or business units.
Yes, in the scheme of things, continuation coverage administration under the Consolidated Omnibus Budget Reconciliation Act (COBRA) might seem pretty insignificant; but to those impacted, the COBRA implications cannot be overlooked. This column explores some COBRA considerations that arise from employers’ reactions to coronavirus.
COBRA administration depends on notices being sent within specified time periods measured around the occurrence of a qualifying event.
In general, an employer has 30 days to notify a plan administrator of a qualifying event that is a termination of, or reduction of hours in, employment or an employee’s death. Qualified beneficiaries have 60 days to notify a plan administrator of other qualifying events, such as a divorce or legal separation or a dependent child ceasing to be a dependent child under the plan terms.
The plan administrator then has 14 days to send the COBRA election notice to qualified beneficiaries. Plan administrators generally are not required to ensure actual receipt of the COBRA election notice—simply mailing that notice to the last known address is deemed sufficient.
Group health plans must give qualified beneficiaries the right to elect COBRA coverage during a defined election period. That period begins on the date the coverage terminates due to a qualifying event (such as termination of employment, reduction in hours, divorce, death, etc.) and continues at least until 60 days after the later of the date: (1) the coverage terminated or (2) the COBRA election notice was provided to the qualified beneficiary.
If a qualified beneficiary elects COBRA coverage, he or she generally will be required to pay a premium. Again, time periods are key. The initial premium payment is due 45 days after the election is made. This initial payment covers the cost of the first month of COBRA coverage. Subsequent premium payments are typically due on the first day of the coverage month, subject to a 30-day grace period.
Although COBRA and its underlying regulations are generally specific about the timing of elections, the regulations do provide that an election on behalf of a qualified beneficiary who is incapacitated or dies “can be made by the legal representative of the qualified beneficiary or the qualified beneficiary’s estate.”
Implicit in this rule is the notion that the relevant election period should be tolled (or held in abeyance) in the proper case in order for a legal representative to be appointed. Courts that considered equitable tolling principles have applied them to the 60-day election period and premium payment periods described above.
Importantly, equitable tolling does not create a new COBRA election period or premium payment period. Instead, it merely pauses those periods until an individual, or an authorized representative, can make an election or a payment.
The concept of equitable tolling arguably could be expanded to include coronavirus situations. For example, suppose a qualified beneficiary is (1) hospitalized in an isolated hospital unit during a COBRA election or premium payment period or (2) under a mandatory quarantine period after a return to the United States from international travel.
If the qualified beneficiary is so confined that COBRA elections or premium payments cannot be made, perhaps equitable tolling would apply to extend the election or premium payment period until the individual is released from confinement. It might appear inequitable to require a qualified beneficiary to act based on a COBRA notice sent to the home address when the individual cannot access the home due to a coronavirus confinement.
In another example, it could appear to be inequitable to terminate group health coverage when a qualified beneficiary may need it most (for example, when the individual is confined in a hospital with coronavirus) solely because the premium payment is late due while the patient is quarantined in the hospital. In these cases, plan administrators could (though are not required to do so) allow for additional time to make COBRA elections and premium payments.
By way of analogy, in cases of past severe disasters, such as hurricane activity, the Departments of Labor and the Treasury have issued guidance requiring flexibility in applying COBRA timing requirements.
For example, with Hurricane Katrina, the agencies issued regulations requiring that COBRA notice mailing and election periods be tolled between August 29, 2005, and February 28, 2006. For Hurricanes Harvey, Irma, and Maria, the agencies issued informal guidance stating that regarding deadlines for making COBRA elections:
The guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being [and] plan fiduciaries should make reasonable accommodations … to minimize the possibility of individuals losing benefits because of the failure to comply with pre-established timeframes.
It is possible that the agencies will issue similar guidance for coronavirus situations or other types of emergency pandemics or exigencies.
Other Coronavirus Considerations
The technical COBRA rules are based on the assumption of otherwise normal circumstances—employees being hired or fired or going out on a leave of absence; dependent children getting older; divorced spouses seeking continuation coverage; etc. The rules do not anticipate how to apply COBRA at the same time as a wide-scale pandemic when there are sudden changes in employment and health coverage needs.
In these emergency situations, plan administrators need to think through the issues and come up with some administrable fixes. Below are some key steps that plan administrators could consider as they attempt to address the issues raised by the recent coronavirus pandemic.
1.Consider not immediately terminating coverage due to the failure to meet a deadline. In the COBRA context, affected qualified beneficiaries likely have elected COBRA coverage because they need it. This need likely will be heightened when someone infected by coronavirus is out of work and eligible for COBRA coverage. Infected qualified beneficiaries who are quarantined may have no access to the plan administrator, and communication may be spotty at best. Under these circumstances, it would be prudent for plan administrators to first assess the situation and develop a strategy before following COBRA’s technical timing requirements.
2.Pass through health plan coverage changes. Some employers are implementing changes to their group health plans to help address the needs of people potentially infected with coronavirus. One basic example is that some plans are covering the cost of coronavirus testing without any cost sharing or payment by participants. Any plan coverage changes need to be passed through to similarly situated COBRA-qualified beneficiaries.
3.Understand who is affected by the disaster. Plan administrators must, of course, identify the group of qualified beneficiaries that is potentially impacted by the coronavirus situation and eligible for any plan relief.
4.Consider giving affected individuals more time to respond to notices or elect/pay for coverage. Based on the tolling principles described above, plan administrators could consider extending the COBRA election and premium payment time frames for those qualified beneficiaries affected by coronavirus.
5.Consider subsidizing the cost of coverage. In some situations, employees who are out with coronavirus illnesses are treated as on a leave of absence. In those situations, employers looking to help with health coverage could consider alternatives to standard COBRA coverage. For example, an employer might subsidize the cost of COBRA coverage for a certain period of time. Or, an employer might provide a voluntary limited extension of group health plan coverage on top of COBRA coverage. When the employer decides to offer this additional coverage, it should review any insurance or stop-loss insurance coverage to ensure that the insurer is “on board” with the decision to extend COBRA coverage beyond the normal period.
6.Decide whether the temporary period of extended coverage will count toward the COBRA coverage period. Building off item 5, if an employer provides a period of extended coverage after what is otherwise a qualifying event, it could have the plan address that extended coverage in one of two ways: The alternative coverage is either added to the COBRA coverage or counted toward satisfying COBRA’s maximum period. Either approach can be accommodated as long as appropriate planning, communication, and documentation are done.
7.Decide when the coronavirus exception is over, and communicate it to affected individuals. Providing reasonable relief to affected individuals is legally permissible and often the right thing to do. However, the relief does not last indefinitely and does not apply to all participants regardless of the circumstances. Once a plan administrator has determined the limits of the relief (that is, how long it will last and to whom it will apply), the limits should be communicated to plan participants and qualified beneficiaries. Although plan documentation might have to be amended to contemplate decisions that are made, the more critical step is often to communicate the decision to affected individuals so they can make appropriate coverage decisions.
8.Communicate coverage status to benefit providers and insurers. Separate from communicating the rules to affected individuals, administrators also need to communicate with benefit providers and insurers. As mentioned above, employers or plan administrators should coordinate with insurers and stop-loss carriers so they are on notice about and in agreement with any proposed relief. Additionally, benefit providers and insurers will need to know if the COBRA election period has been extended for individuals impacted by the coronavirus situation so they can properly communicate to qualified beneficiaries when claims are submitted. COBRA rules require that plan administrators explain the coverage status of individuals who are eligible to elect COBRA and have not yet done so when a claim occurs. Essentially, the administrator must explain that the individual has a period (the COBRA period) within which to elect COBRA coverage and, if coverage is elected and paid for, that it will be retroactive.
9.Anticipate open enrollment problems. If the coronavirus (or other pandemic situation) extends into an open enrollment period, employers and plan administrators may have difficulty explaining how the COBRA election period interacts with open enrollment. Plan administrators should carefully draft open enrollment materials to explain how any relief provided to victims of coronavirus might impact a COBRA election decision.
10.Bring the plan into documentary compliance. Under the Employee Retirement Income Security Act (ERISA), benefits plans must be operated in accordance with the terms of the plan document. To the extent that any special coronavirus-related changes vary from the plan document terms, employers and plan administrators will need to ensure the plans are eventually amended to reflect the temporary relief provided in connection with the pandemic. This type of amendment might be included as a separate appendix or “add on” document.
Employers and plan administrators often have little time to prepare for sudden emergency situations, like the coronavirus situation. By considering the steps outlined above, employers and plan administrators might have a better road map to work with in implementing and administering COBRA coverage changes.