By: HUB’s EB Compliance Team
The Departments of Labor (“DOL”) and Treasury/IRS have provided some relief for plan-related deadlines (see the DOL only guidance here and the joint regulations here). However, the additional flexibility for plan participants creates administrative burdens for employers. In this piece we’ll focus on the relief for plan participants, while here we focus on the relief for employers and plan fiduciaries.
The relief fundamentally provides a “pause” for counting the days for purposes of certain deadlines. The pause started on March 1, 2020 and goes until 60 days after the end of the Presidentially-declared national emergency or, if earlier, February 28, 2021 (the “Outbreak Period”). In other words, if a COBRA election has to be made within 60 days, the former employee or beneficiary gets the full 60 days plus the Outbreak Period to make the election. More examples are below.
The biggest risk and the biggest potential exposure for employers are the COBRA notice periods. The joint DOL and IRS regulations say the following COBRA deadlines are “paused” during the Outbreak Period:
- The 60-day election deadline;
- The 45-day period to submit COBRA premiums, once COBRA coverage is elected (the initial payment);
- The 30-day grace period for a COBRA qualified beneficiary to make monthly COBRA premium payments (ongoing payments); and
- The date for individuals to notify the plan of qualifying events (such as divorce or disability).
This means, for example, that someone who owes COBRA premiums during the Outbreak Period has until 30 days after the end of the Outbreak Period to pay those premiums. The following example (adapted from the regulations) makes clear that plans cannot cancel coverage due to non-payment. However, it appears they may be able to pend claims during this time.
On March 1, 2020, Cassie was receiving COBRA continuation coverage. Monthly premium payments are due by the first of the month. The plan has the minimum 30-day grace period for premium payments. Cassie made a timely February payment, but did not make the March payment or any later payments during the Outbreak Period. For purposes of the example, assume the Outbreak Period ends on June 29, 2020. As of July 1, she has made no premium payments for March, April, May, or June.
If premium payments for March, April, May, and June 2020 are made by July 29, 2020 (30 days after the assumed end of the Outbreak Period), they are considered timely. In other words, premium payments for four months (i.e., March, April, May, and June) are all due by July 29, 2020.
Cassie is eligible to receive coverage under the terms of the plan during this interim period even though some or all of her premium payments may not be received until July 29, 2020. The insurer or plan may not deny coverage, “and may make retroactive payments for benefits and services received by the participant during this time.” Additionally, if Cassie only makes payments for two months, a separate example makes clear that those payments are applied to the first two months for which premiums are due (March and April, in this example).
Based on the statement that the plan “may make retroactive payments” for services during the period for which premiums are due, it appears that plans may be able to pend claims while they await the premium payments. However, this is not clear from the regulations and employers should work with their carriers, third-party administrators, and COBRA administrators to determine how this will be applied. Self-funded employers with stop loss coverage should also contact their stop loss carriers to determine how these claims will be handled. Off-calendar year plans should be especially conscious of how claims that are incurred in one plan year but paid in the next will be treated.
Comparatively, the relief for employers was minimal. The only COBRA relief for employers was the 14-day deadline for providing COBRA election notices is similarly paused during the Outbreak Period. Generally, the plan administrator must provide the notice within 14 days after being informed of the qualifying event by the employer. The employer must notify the administrator of the qualifying event within 30 days after it occurs. (If the employer is the plan administrator, the two periods are combined.) Notably, the 30-day period is not paused. This means employers will still need to notify their administrators within 30 days after a qualifying event occurs, but the administrators have additional time to send the notices.
Additionally, the 30-day period to make election changes due to HIPAA special enrollment events (or 60-day period, for certain events) is extended. Specifically, the Outbreak Period is disregarded in counting the 30- (or 60-) day period. Therefore, if an employee had a special enrollment event (such as the birth of a child) that occurs during the Outbreak Period, then he or she would have 30 days after the end of the Outbreak Period to make the election. Additionally, if an employee had a special enrollment event within 30 days (or 60 days, for certain events) before March 1, 2020 (for example, a birth of a child on February 15), the rest of the 30 (or 60) days would be available after the end of the Outbreak Period. Note that this does not apply to all changes in status, but only those required under HIPAA special enrollment rights.
Additionally, the deadlines for employees to submit and appeal claims are also paused for the Outbreak Period. This applies to the following deadlines:
- filing a claim;
- appealing a clam denial;
- requesting external review; and
- filing information needed to complete/perfect an external review request.
For example, most group health plans give an employee 180 days to appeal a denied claim. If an employee’s 180-day period would normally start on April 1, that employee now has 180 days after the end of the Outbreak Period to file that appeal. Similarly, if a plan says that an employee must submit a claim within a year of when the medical service is provided, the plan must add the length of the Outbreak Period to that deadline. For example, if the Outbreak Period is six months, an employee that incurred a claim on February 1, 2020 would have a year and a half to submit the claim.
Notably, there are no extensions of the deadlines for the plan to respond. Therefore, if a plan receives an appeal, it still must respond within the deadline specified in the plan documents. This means that, while participants have significant additional time to submit claims, employers and plans are still held to strict deadlines to respond to those claims, or risk litigation. Under DOL regulations, any failure to meet the deadlines for the plan to respond generally gives the participant the ability to go directly to court. The DOL provided no relief from this requirement.
Employers will need to work with their carriers and third-party administrators to make sure participants and other claimants are being given sufficient time to submit and appeal claims. Employers with self-funded plans should also work with their stop-loss carriers to address these delayed claims. They should also discuss with their actuaries what effect these delays have on incurred but not reported reserves for the following year.
The relief granted to plan participants means employers now have several practical challenges to address. In particular the COBRA challenges are the most pressing, followed by the special enrollment challenges and finally the claims deadlines.
The additional time for participants to make COBRA payments means employer sponsored plans must determine whether they can and will “pend” claims (i.e., not pay them until payment is made, but also not deny them) incurred by those plan participants who have not paid their premiums.
- The Outbreak Period could extend for several additional months, meaning its possible claims could sit unpaid for quite some time.
- The delay in paying claims may potentially upset providers who have rendered services and are awaiting payment, and possibly even violate timing of payment requirements in network agreements.
- Plan participants may have difficulty paying several months of COBRA premiums at once after the Outbreak Period ends and payment is required. Therefore, employers may want to encourage COBRA beneficiaries to make partial payments, to the extent they are able.
- Failure to pay premiums after the Outbreak Period will result in denial of pending claims, which means the participant will be personally responsible for the claims.
- Given the retroactive date of the relief (to March 1), perhaps the most challenging administrative issue may be reinstating coverage for employees who failed to pay premiums, but who now are entitled to this retroactive relief.
- Employers should consult with counsel on how best to communicate these extended deadlines.
The additional time participants have to exercise their special enrollment rights presents plans with many of the same issues faced under COBRA.
- Plans will have exposure to potentially significant claims which they aren’t even aware of until they receive the notices.
- Participants will be allowed to “wait and see” if they wish to exercise their rights, and possibly only do so if they have claims.
- In the case of birth or adoption, participants who exercise their rights must be prepared to pay retro premiums back to the date of the birth or adoption.
The extension of the claims deadlines described above have little administrative impact to plans as plans must still respond within the prescribed deadlines. From a financial perspective however, plans may see a significant impact as the extended deadlines increase the likelihood that plans will pay claims significantly after they have been incurred. Self-insured plans in particular need to ensure their stop loss policies don’t have any potential gaps that may be exposed by claims paid later than customary or allowed by the policy due to these extended deadlines.
For the latest information on the COVID-19 crisis and its effect on employers, please keep visiting HUB’s Coronavirus Resource Center. If you have any questions, please contact your HUB Advisor. You can also view more compliance articles in our Compliance Directory.
NOTICE OF DISCLAIMER
The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.