By: HUB’s EB Compliance Team
As we reported last year, the Departments of Labor (“DOL”) and Treasury/IRS provided COVID-related relief for deadlines related to COBRA, HIPAA Special Enrollment Rights and claims procedures. The relief provided a “pause” for counting the days allowed to take those actions, giving participants more time. Then, in February, we issued a warning that this pause was scheduled to end February 28, 2021, but that the government agencies could try to reinterpret the guidance to extend it. They have now done so.
The DOL has released updated guidance (with the agreement of other relevant agencies) stating that the pause (called the “Outbreak Period”) now runs on an event-by-event basis. While understandably helpful to participants, this interpretation is going to be administratively burdensome for employers, third party administrators, insurance carriers, and COBRA administrators.
The Outbreak Period for One is not the Same for All
The DOL now says that every individual gets an extension to take those actions based on when their COBRA, special enrollment, or claims event occurred, rather than a single extension for all people and events. This means, for each event, the Outbreak Period will end on the earlier of:
- One year after it starts for that event; or
- 60 days after the national emergency declared for the COVID-19 pandemic ends.
For context, President Biden recently extended the national emergency, so it is still ongoing.
What Does This Apply To?
These extensions apply to the following actions:
- For COBRA:
- The 60-day COBRA election;
- The 45-day period to submit COBRA premiums, once COBRA is elected (the initial payment);
- The 30-day grace period for a COBRA qualified beneficiary to make monthly premium payments (ongoing payments);
- The date for individuals to notify the plan of COBRA qualifying events (such as divorce or disability);
- For HIPAA special enrollment rights, the 30- or 60-day time period to make election changes; and
- For ERISA claims deadlines:
- filing a claim;
- appealing a clam denial;
- requesting external review; and
- filing information needed to complete/perfect an external review request.
Freezing the Clock
Like the prior guidance, the Outbreak Period is disregarded. This means the clock is “paused” to take these actions until the Outbreak Period is over for that event.
This can be a bit of a mind bender, so some examples may help.
Example 1: Amelia experienced a COBRA qualifying event on August 31, 2020, but did not elect COBRA. Assume that the President does not end the national emergency until the end of 2021. The Outbreak Period will end for her on August 31, 2021 and she will have 60 days (the normal COBRA election period) after that to elect COBRA (or until October 31, 2021) and another 45 days to pay her retroactive COBRA premiums. If Amelia pays for only part of her COBRA coverage, the payments will be applied to the earliest months first (i.e., starting with August 2020).
Example 2: Assume instead that the President ends the national emergency on May 31, 2021 (This is optimistic, we know), but Amelia’s other facts stay the same. The Outbreak Period for Amelia will end 60 days after that, so July 30, 2021. She will then have 60 additional days (the normal COBRA election period) after that to make her election (or until September 28, 2021).
Example 3: Sean got married on February 2, 2020 – BEFORE the beginning of the original Outbreak Period on March 1, 2020. Sean is entitled to enroll his spouse under a special enrollment right with 30 days’ notice. However, Sean has not done so. Because his event occurred before the original Outbreak Period was announced, his Outbreak Period will end on February 28, 2021.
At the time the Outbreak Period began for Sean (on March 1, 2020), 28 of Sean’s 30 days had passed. Therefore, Sean only has two days left to add his spouse after the Outbreak Period ends. Why? Since the Outbreak Period began AFTER Sean’s marriage, the days prior to the effective date of the Outbreak Period will count toward Sean’s deadline. This means if Sean wants to add his spouse, he must do so by March 2, 2021. (Note that if this had been the birth or adoption of a child instead of marriage, the coverage would have to be retroactive to February 2, 2020.)
Example 4: Assume the national emergency does not end until November 30, 2022. Kendrick submits a claim on August 1, 2021. The claim is denied on August 5, 2021 and, under the plan, Kendrick would normally have 180 days to appeal the claim. However, Kendrick’s Outbreak Period for his appeal does not start until he receives his claim denial. Kendrick’s Outbreak Period will end on August 4, 2022. He will have 180 days after that to submit his appeal.
Example 5: Assume instead the President ends the national emergency on March 31, 2022, but Kendrick’s other facts stay the same. Now, Kendrick’s Outbreak Period will end on May 30, 2022 (i.e., 60 days after the national emergency is over). He will have 180 days after that to submit his appeal.
But Wait, There’s More
The new DOL guidance also suggests that if the plan administrator/employer may need to communicate the end of an Outbreak Period. Specifically, a communication may be required if the plan administrator/employer knows, or should reasonably know, that the end of the Outbreak Period creates a risk that the person will lose out on benefits, rights, or protections under the plan (for example, if there is a risk the person could lose coverage by not electing COBRA).
Additionally, if prior communications incorrectly described the Outbreak Period, then the employer/plan administrator has an obligation to update them.
We noted the administrative complexities associated with the Outbreak Period when it was originally announced last year. This new interpretation only makes the administrative concerns more pronounced since employers and their administrators will now have to track dates on an event-by-event basis. For next steps:
- Employers should reach out to their vendors involved in plan administration (e.g., third party administrators, COBRA administrators, flex plan administrators, etc.) to confirm that they are aware of this guidance and will administer it appropriately.
- Employers should develop a communication strategy that could include one or more of the following elements:
- Issuing a notice to employees and COBRA beneficiaries informing them of the extension of the Outbreak Period and how it applies.
- Encouraging COBRA beneficiaries to make partial payments, to the extent they are able, to avoid having a large bill when the Outbreak Period ends for a COBRA action.
- Periodically reminding active employees of their special enrollment rights, particularly around the birth or adoption of a child. This will avoid a large potential bill for retroactive premiums in the case of birth or adoption. Note that premiums for coverage in a prior cafeteria plan year cannot be paid for with pre-tax dollars. Employees would have to arrange for the payment of those premiums on an after-tax basis.
- Regular reminders (either on a group basis or individually, or a combination of both) that the Outbreak Period may end for each person, and each event, on a different date.
- When the national disaster is finally declared over, a (hopefully final) notice about the end of the Outbreak Period.
- Self-insured plans should review these changes with their stop-loss carrier to determine the guidelines and protocols that will apply to these separate Outbreak Periods and necessary language to include in their plan documents.
- With regard to claims, plans may see a financial 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.
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