Labor and Treasury Departments and IRS Issue Relief to Employee Benefit Plan Participants & Beneficiaries during the COVID-19 National Emergency

On April 29th, in connection with the National Emergency declaration related to COVID-19, the Department of Labor, the Department of the Treasury, and the Internal Revenue Service (the “Agencies”) jointly issued a final emergency regulation which aims to minimize the loss of employee benefits due to certain ERISA and Internal Revenue Code-related compliance failures. While the Administrative Procedure Act generally requires agencies to follow certain notice and comment procedures when promulgating rules, the Agencies invoked the statute’s “good cause” exception to forgo these regular procedures. 

Specifically, the final regulation provides relief for HIPAA special enrollment rights, COBRA elections and notices, and ACA-mandated internal and external review timeframes. According to the final regulation, plans must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency, or such other date announced by the Agencies in a future notice. This period is referred to as the “Outbreak Period.”

The final regulation provides relief to plan participants, beneficiaries, qualified beneficiaries, or claimants in determining the following periods and dates:

• The 30-day period (or 60-day period, if applicable) to request HIPAA special enrollment;
• The 60-day election period to elect COBRA continuation coverage;
• The date for making COBRA premium payments;
• The date for individuals to notify the plan of a qualifying event or determination of disability for COBRA purposes;
• The date within which individuals may file a benefit claim under a plan’s claims procedure; 
• The date within which claimants may file an appeal of an adverse benefit determination under a plan’s claims procedure;
• The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination; and
• The date within which a claimant may file information to perfect a request for external review

While the final regulation applies broadly to all ERISA-covered plans and programs, it will have the most immediate and significant effect on COBRA notices and elections. Group health plans must treat COBRA premium payments as timely paid without regard to payments that would have been due during the Outbreak Period. The Outbreak Period is similarly disregarded when determining the date for providing COBRA election notices. The preamble to the regulation also reports that the Department of Health and Human Services will apply and encourage states to adopt similar relief for non-ERISA covered plans.

Examples from the Final Regulation

The final regulation include a helpful set of examples that assume that the COVID-19 National Emergency ends on April 30, 2020. For purposes of the below examples, therefore, the Outbreak Period begins March 1, 2020 and ends on June 29, 2020 (i.e., the 60th day after the end of the National Emergency). We highlight some of the most relevant examples below:

• In Example 1, a worker participates in the employer’s group health plan. The worker’s hours are reduced below the hours necessary to meet the group health plan’s eligibility requirements. The worker is provided a COBRA election notice on April 1, 2020. Accounting for the Outbreak Period, the last day of the worker’s COBRA election period is 60 days after June 29, 2020, or August 28, 2020.
• In Example 3, a worker was receiving ongoing COBRA continuation coverage under a group health plan. The plan generally requires that monthly premium payments be paid by the first of the month. The plan has a 30-day grace period for making premium payments. The worker made a timely February payment, but did not make the March payment or any subsequent payments during the Outbreak Period. The Outbreak Period is disregarded for purposes of determining whether monthly COBRA premium installment payments are timely. Premium payments made by 30 days after June 29, 2020, which is July 29, 2020, for March, April, May, and June 2020, are timely, and the worker is entitled to COBRA continuation coverage for these months if he or she "timely" makes payment. Here, payments for March, April, May, and June are all deemed to be "timely" if they are made within 30 days after the end of the Outbreak Period. Accordingly, the premium payments for four months (i.e., March, April, May, and June) are all due by July 29, 2020.
• Example 4 makes clear that coverage need not be provided or paid where COBRA premiums payments are not timely made. Here, the worker discussed in Example 3 (above) pays only two months’ premiums by July 29, 2020. As a result, this worker is entitled to COBRA continuation coverage for March and April of 2020. The worker is not entitled to COBRA continuation coverage for any month after April 2020. The plan would not be obligated to cover benefits or services that occurred after April 2020

Final Thoughts

What does this mean for employers?  More diligence.  Because COBRA-qualified beneficiaries have a period of time in which to see if a health condition develops before electing COBRA coverage, COBRA tends to encourage adverse selection. (Adverse selection generally refers to situations in which a plan or carrier extends insurance coverage to an applicant whose actual risk is substantially higher than the risk known by the plan or carrier.)  The further extension of the COBRA election period under the final regulations exacerbates – and it can therefore be expected to further increase – plan costs. Under ordinary circumstances, employers and their COBRA administrators should carefully manage their COBRA programs to minimize the window of opportunity for adverse selection after a COBRA qualifying event. Now more than ever, this means paying particular attention to COBRA eligibility, getting notices out timely, and diligently collecting premiums.

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