COBRA Extensions for Disaster Releif Areas
COBRAinReview:
December 2024
In response to the devastation caused by Hurricane Helene, Tropical Storm
Helene, and Hurricane Milton, the Employee Benefits Security Administration
(EBSA) and the Internal Revenue Service (IRS) have extended key deadlines for
COBRA continuation coverage. This relief ensures that individuals and plans in
disaster-affected areas are given more time to comply with COBRA requirements.
Who is Affected?
Participants, qualified beneficiaries, and group health plans located
in FEMA-designated disaster areas in Florida, Georgia, North Carolina, South
Carolina, Tennessee, and Virginia may qualify for these extensions.
Extended
Deadlines Include:
- 60-Day COBRA Election Period
- Normally, individuals
have 60 days to elect COBRA continuation coverage after losing coverage. This
period is extended for the duration of the Relief Period.
- Payment of COBRA
Premiums
- COBRA premiums, usually due within 30 days of the coverage period,
now have extended deadlines. Plans cannot terminate coverage for late payments
during the Relief Period.
- Notices for Qualifying Events or Disabilities
- Participants and employers have additional time to notify plans of qualifying
events (e.g., loss of coverage or disability determinations).
- COBRA
Election Notices
- Employers and plan administrators have extra time to send
COBRA election notices to qualified beneficiaries.
Relief Periods by State
The Relief Period is the timeframe during which normal COBRA deadlines are suspended. Below are the start and end dates based on location:
What This Means for You
For COBRA participants:
For COBRA administrators:
Stay Updated
For more information on disaster relief and COBRA extensions, visit:
If you have specific questions, contact the Department of Labor at 202-693-8335 or the IRS at
202-317-5500.
Preserving Coverage During Difficult Times
This extension is designed to help those affected by these disasters retain access to crucial health benefits.
We encourage you to review the new deadlines and take any necessary action
within the extended timeframes.
2023 The End of the National Emergency due to COVID-19
COBRAinReview:
Quarter
2, 2023
On February 10, 2023, President Biden signed
Doc. 2023-03218, that extended the ongoing national emergency concerning the
COVID-19 pandemic to continue beyond March 1, 2023. Within the same document,
he stated that he anticipated terminating the national emergency on May 11,
2023. Then, on April 10, 2023, the President signed into law
H.J. Res. 7, which terminated the national emergency effective immediately.
COBRA Solutions, Inc. has reviewed the law and has determined the
procedures needed to get back to normal COBRA Administration. Please take the
time to read and understand how this announcement will affect your COBRA
administration.
What was changed by the National Emergency?
Effective March 1, 2020, the Disaster Relief and Emergency Assistance Act
implemented numerous changes to assist citizens and businesses during the
pandemic. Specific to COBRA, it provided “extended” time frames for Plan
Participants and Qualified Beneficiaries. These
changes mandated that COBRA Administrators “disregard” the normal sixty-day
election period and the forty-five/thirty-day standard premium payment grace
period until sixty-days after the announced end of the National Emergency or
what they called the “Outbreak Period.”
When the law was written, it was assumed that it would be a short-term
assistance package. However, after one year the national emergency was renewed
(a national emergency expires after one year, if not renewed) and the
Department of Labor released
Notice 2021-01 which provided guidance for Plan Administrators and affected
individuals. It limited the disregarded period for individuals to 1-year from
the date that the individual was required to act or 60-days after the announced
end of the national emergency.
When is the change effective?
The law stated that the standard election period and premium payment grace
periods would begin sixty-days after the announced end of the National
Emergency. Which makes the effective end date July 10, 2023 (or the described
Outbreak Period).
What changes have been made to the COBRA Administration Manager due to the end of the national emergency?
After updating your software to version 23.5.x, you will see the following changes.
- The notices will continue to show information on the extended election
period until June 9, 2023; thereafter there will be no mention of the
national emergency and its extended time frames.
- COBRA-qualified beneficiaries who are sent a qualifying event notice
between April 10, 2023, and June 9, 2023, will receive an additional
election extension of no more than 60-days.
- COBRA-qualified beneficiaries who previously experienced a qualifying
event or whose qualifying event letter was sent after April 10, 2022
(one-year prior to the national emergency end date) will begin their normal
60-day election period on June 9, 2023, subsequently ending on August 8,
2023.
- COBRA Participants will return to standard premium payment grace period
(45-day initial or 30-day subsequent) on June 9, 2023 (60-days after the
outbreak period).
- The suspension of COBRA coverage and the associated notice will end on
June 9, 2023.
- An End of National Emergency letter has been added so that you may
communicate with affected individuals of the end of the national emergency.
- The COBRA reports have been updated to use the end of National Emergency date.
Do we need to notify COBRA Qualifiers and Participants of the end of the
National Emergency?
Yes, we believe that you should. At this time, sending a letter
to affected individuals is not required by law, but the Department of Labor has
recommended that plans communicate the end of the National Emergency to impacted
individuals in advance.
How do I update my software to the new version?
To perform an update to your software, start the COBRA Administration Manager software and under the
File menu, select “Update Software via Internet” and then follow the provided instructions.
2021 COVID-19 COBRA Extensions Compliance
Information
COBRAinReview:
Quarter
1, 2021
It has been one year since the relaxed COBRA timeframes became
effective on March 1, 2020 and as we reach the 1 year anniversary
we finally receive guidance from the Department of Labor in the
form of a “Joint Notice.” The joint notice is a collective
effort from the Department of Labor, the Department of the Treasury,
and the Internal Revenue Service.
The joint notice reveals that the Outbreak relief period is expressly
limited by statue to a period of one year and each qualified beneficiary
will be treated on an individual bases and be allowed the 1 year
timeframe extension or until the outbreak has ended.
Obviously this puts a huge burden on employers and COBRA administrators.
Trying to track all these new timeframes is very difficult. This
is where your software comes in to play. With version 21.3.x (available
for download now), your software will do the following things.
- Track 1 year anniversary dates for each QB
- Terminate coverage for participants that have passed their
1 year anniversary (applicable COBRA timeframes still apply).
- Return to normal 45-day and 30-day payment grace period
for COBRA participants that have have passed their 1 year anniversary.
With all these new changes, we have a couple of examples that
should help you understand the how the election and premium payment
grace period extensions will end.
Example 1: Thomas has a COBRA qualifying event on September 30,
2020, but does not elect COBRA. Assuming the national emergency
is not ended prior to September 30, 2021, Thomas will receive 60-days
after his 1 year timeframe extension (November 20, 2021) to elect
COBRA.
Example 2: Debbie has a qualifying on August 31, 2020, but does
not elect COBRA. On May 31, 2021 the president ends the National
Emergency. Debbie will receive 60-days after that and then another
60-days (normal COBRA timeframe) to make her COBRA election (or
until September 28, 2021).
COVID-19 COBRA Timeframe Extensions
COBRAinReview:
Quarter
2, 2020
On March 13, 2020, President Trump issued the Proclamation on
Declaring a National Emergency concerning the COVID-19 outbreak
with an effective date of March 1, 2020. As a result of the National
Emergency, participants and beneficiaries covered by group health
plans (or other employee welfare benefit plans) may be encountering
problems in exercising their health coverage portability and continuation
coverage rights. For this reason, Federal government agencies have
extended certain timeframes otherwise applicable to group health
plans. Although the National Emergency changes numerous timeframes,
this article will address how the law affects COBRA.
With many businesses closing down over the past couple of months,
employees (and COBRA Participants) have many questions related to
their employer-sponsored group health plan. What if my employer
doesn’t pay the group insurance premium? If I am terminated,
will COBRA be offered to me? I sent back my COBRA Election Form
with premium, but I have not been reinstated – what should
I do? The Third Party Administrator that collects my COBRA premium
is closed and not forwarding the funds to my employer – will
I be terminated? In these recent months, many individual’s
health coverage was/is in jeopardy, so the government took action
to slow down the process of terminating employees from a group health
plan.
To make sure people did not inadvertently lose coverage, the
government extended COBRA-related timeframes until the end of the “outbreak
period.” The question is - when is the end of the outbreak
period? At the time of this publication, that date had not been
determined. The Federal Register states that COBRA related timeframes
will be placed on hold until an “outbreak period End Date”
has been announced. Once the End Date has been determined, they
are providing a sixty (60) day processing period before the normal
COBRA-mandated timeframes begin. For example purposes only, if the
outbreak End Date is determined to be June 30, 2020, we can then
calculate the COBRA-related timeframes. First, we add the 60-day
processing period, establishing an August 29, 2020 “Determination
Date.” From this Determination Date, we would begin tracking
COBRA’s normal mandated timeframes.
COBRA Qualifiers with a qualifying event date between March 1,
2020 and August 29, 2020 (based upon the above example date) would
be offered their 60-day election period beginning on the Determination
Date to elect COBRA. Administrators would still notify the insurance
carrier to terminate group coverage as of their qualifying event/loss
of coverage date. If they elect COBRA, they would be reinstated
back to the date coverage was lost and provided 45-days from August
29th (as in the above example) to make their initial COBRA premium
payment. It is recommended that you do NOT reinstate these Qualifiers
until an initial premium payment is made. COBRA Qualifiers may NOT
elect their COBRA Start date; they will be retroactively reinstated
to the date coverage is lost and responsible for all premium payments
back to their COBRA start date.
Premium payments that are received will be applied to the first
month that premiums are due. So, if a Participant is paid through
April 30th and you receive a payment in August, those funds would
be applied to May and following months in succession. The Participant
is NOT allowed to tell you what months they wish the payment to
apply.
During the outbreak period, if premium payment is not received,
the Participant’s account should be suspended. Administrators
should notify the carrier that the Participant had not made their
standard payment and should be terminated/suspended at that time.
The software will inform you in the Things-to-do box to send a COVID
Suspension notice (instead of the usual termination for nonpayment
notice). This will be the Administrator’s trigger to contact
the insurance carrier(s) and inform them to terminate/suspend the
Participant’s account. If payment is received within the 30-day
(45 day initial) grace period (commencing on the Determination Date),
payment will be applied beginning with the month after the paid
through date. Claims will be paid for months with full premium payment.
For nonpaying COBRA Participants during the outbreak period,
they will be informed by health providers and pharmacies that they
do not have coverage. The suspension notice informs them to keep
receipts for all covered benefits and submit a claim for reimbursement
after premiums are paid. Participant will need to work with the
insurance companies in receiving reimbursement for incurred claims
during the extension.
Federal Government Release:
Federal Register
-
https://www.federalregister.gov/documents/2020/05/04/2020-09399/extension-of-certain-timeframes-for-employee-benefit-plans-participants-and-beneficiaries-affected
Department of Labor -
https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/covid-19.pdf
New Department of Labor COBRA Letters
COBRAinReview:
Quarter 1, 2020
Recently, the Department of Labor release new revisions of the
DOL General Notice and DOL Qualifying Event letter. Upon our initial
review, we found mainly wording changes, not changing the expressed
meaning of the notifications. It seems the new letters replaced
more complex words with “more common” variations.
To receive these new letters, you will need to perform an update.
The most common method for obtaining the update is to:
- Under the File menu, select the “Update Software via
Internet” option. (If Microsoft Windows asks if you wish
to start as “Administrator,” select “No.”);
- Click the Next button to access the files;
- You will be asked if you wish to review the new letters.
You can select the desired letter and you will be shown the
changes in red text.
- Click the Next button and you will be provided a button
to select the letters you wish to update and the groups that
will be updated. If you do not select the letters (which is
not recommended), they will not be updated in your system.
- If you are a Third Party Administrator
and make your own changes to the notice, you may want to just
update one group. Upon completion, you can add/remove information
as you wish and they save the document. Once saved, you may
go under Notifications > Copy Letters to Other Groups. Select
the altered letter(s) and the groups you wish to update and
click the Copy Now button.
Upon completion, you will be given a Congratulations message
and the COBRA software will restart.
If your firewall blocks you from obtaining the update through
the software (as described above), you can directly download it
by visiting www.cobrasolutions.com/firewall.
- Click on the “Updating Version 20 when you have a
firewall;
- Follow the instruction on the web page;
- Under step #3, you will be asked to provide a password for
the update. The current password can be found in the emailed
version of this newsletter (right column).
- Continue to follow the steps followed by entering the COBRA
Administration Manager and replace the current letters with
the new ones. (If you are a TPA, you may want to update just
one group first, following step 5 above.)
When Administrating COBRA it is Best
to Stick to the Guidelines
COBRAinReview:
Quarter 1, 2020
We frequently receive questions regarding whether or not to make
exceptions to COBRA guidelines regarding late payments, late elections,
etc. Being sensitive or compassionate to an individual’s situation
is typically good practice; however, with COBRA it is best to stick
to the guidelines. When you make exceptions to the COBRA rules you
are setting a precedent – that means you will also need to
apply it to all future instances. Following are a few examples where
employers should give careful thought and consider sticking to the
COBRA timeframes:
COBRA Premiums
COBRA has set time frames
for the qualified beneficiary (QB) to make their COBRA premiums;
there is a 45 day grace period for the 1st payment and then a 30
day grace period thereafter. If a QB requests that you accept a
late payment, the employer should consider sticking to the rules
and not allow for the additional time. The exception here would
be an insignificant premium underpayment or incapacity (mental or
physical incapacity that makes an individual unable to act or respond).
Secondary Qualifying Events
To be eligible
for a secondary qualifying event (death, divorce or legal separation,
loss of dependent status or Medicare entitlement) the qualified
beneficiary has 60 days to notify the plan administrator of the
secondary event. The 60 day clock does not start until the employer
provides the notice for this event. If the QB notifies the employer
outside of the 60 day time frame the employer should confirm that
the notice was provided to the QB in a timely manner. If so, then
it would be prudent to adhere to the 60-day timeframe.
Disability
This extension allows a qualified
beneficiary to lengthen COBRA from 18 months to 29 months if the
following requirements are met:
A Participant must have been disabled (prior
to or) within 60 days of the COBRA start date. The Social Security
Administration will make the determination as to the eligibility
for Social Security benefits and notify the individual if they are
considered disabled. The participant needs to provide a copy of
this determination prior to you offering the 11 month extension.
During this disability extension period the
employer can charge up to 150% of the COBRA premium. It is important
for the employer to remain consistent and charge all qualified beneficiaries
the 150 percent or the determined amount for the disability extension
period.
Providing COBRA beyond 18 months
In some
cases an employer might feel sorry for the situation a qualified
beneficiary is in and want to extend the COBRA coverage over the
18 month time frame. COBRA has established timeframes for each event.
For termination and reduced work hours COBRA provides 18 months
of coverage. For other events like death of employee, divorce and
loss of dependence status COBRA provides 36 months of coverage.
Extending these timeframes is not in the employer’s best interest
and may lead to establishing an unwanted precedent. Especially since
the insurer may not allow it.
Late Elections
Qualified beneficiaries must
be given at least 60 days for the election. This period is measured
from the later of the coverage loss date or the date the COBRA election
notice is provided by the employer or plan administrator. The important
aspect of this is to view the postmark date on the election as the
official date to use in these circumstances. Again, accepting an
election notice past the 60 day election period is not good practice.
You definitely do not want to set a precedent with the election
period.
If an employer does decide to make an exception to the COBRA
rules, they should consider the negative and positive consequences
of the rule and determine how the decision would impact a precedent
and the likelihood of the circumstances being repeated. The employer
also must confirm with the insurer if making exceptions outside
the COBRA rules to make sure they would be allowed. Lastly, make
sure to communicate with everyone involved and document the reasons
justifying the exception.
COBRA Training 101
COBRAinReview:
Quarter 4, 2019
As we enter a new year, we receive numerous phone calls regarding
COBRA administration procedures. And with the addition of many new
users, our staff feels it important to go through the basics of
COBRA administration so everyone has a clear understanding as to
"what needs to be done when" and your administration responsibilities.
We know that this may be elementary for many of our seasoned professionals
but we still recommend that you take the time to read through it.
• What is COBRA?
• What is a qualifying event?
• What
are the required notifications?
• What about COBRA Premiums?
• What is a disability extension?
• What is a Multiple Qualifying
Event?
Q: What is COBRA?
A: In July of 1986, Congress
passed the Consolidated Omnibus Budget Reconciliation Act, commonly
known by its acronym COBRA. In the 1980's (as with today), the population
of uninsured Americans was growing at an alarming rate. Congress
determined that many of these uninsured individuals have some relationship
to an employer. Their thought was to create legislation that would
allow employees and covered dependents the ability to temporally
continue their group coverage for a reasonable amount of time when
they experience a "qualifying event."
Q: What is a qualifying event?
A: There
are two types of qualifying events; ones that affect employees and
others that affect an employee's dependents. The two qualifying
events that affect employees are (1) Termination of Employment (for
reasons other than "gross misconduct") and (2) Reduction in Work
Hours. To be considered a qualifying event, the employee must have
a loss of coverage. (Example: If an employee has a reduction in
work hours but is still eligible to continue under the group plans,
there is no qualifying event.) Employees experiencing one of these
events are eligible to continue coverage (for themselves and their
covered dependents) for up to eighteen months under federal COBRA.
(Some states such as California, New York, Connecticut and Texas
have extended the maximum time frame.)
Dependents have their own qualifying events; Death of the Employee,
Divorce or Legal Separation, Employee's Medicare Entitlement and
Dependents that no longer meet the definition of a "Dependent" under
the group insurance contract. Covered dependents that experience
these qualifying events (in most cases) will experience a loss of
coverage and should be offered the right to continue for up to thirty-six
months.
Members losing coverage upon experiencing one of these events
is classified as a "qualified beneficiary." Each qualified beneficiary
has independent rights under COBRA. This means a spouse or dependent
child may continue singularly on the group plan as if they were
an employee of the company. They may only enroll on the plan(s)
they were enrolled on the day prior to the qualifying event (unless
they move from a specific service area and another plan is available).
At Open Enrollment time, the qualified beneficiary has the same
rights as "similarly-situated active employees" and may add/change
plans, even add dependents. Dependents added during open enrollment
do not receive the same rights as a qualified beneficiary but merely
may continue coverage with the qualified beneficiary. In the software,
we refer to qualified beneficiaries as "qualifiers."
Q: What are the required notifications?
A:
COBRA requires employers (with twenty or more employees on at least
half of the business days in the previous calendar year) to provide
written notifications to inform employees and their covered dependents
of their rights to continuation coverage. The law requires seven
notices; the General Notice, Qualifying Event Notice, notice of
Conversion rights under eligible group plans, Open Enrollment letter,
Short Payment Letter, Unavailability of COBRA notice and a Termination
letter when the qualified beneficiary terminates coverage prior
to the end of his COBRA term. All notifications may be sent by USPS
first class mail. (Administrators are not responsible to verify
the qualified beneficiary receives the notice but merely prove it
has been sent to the last known address.) The General Notice is
designed to be sent to newly-hired employees as they enroll on one
or more of the group plans. This notification explains COBRA and
the steps necessary for notifying the Plan Administrator of a qualifying
event. This notice should be sent to both the employee and covered
spouse. Many insurance companies include the General Notice in their
certificate of coverage but it is recommended a notice be sent via
mail. COBRA requires the General Notice be sent within ninety days
from the date coverage becomes effective. To produce this letter
in the software, click File and Newly Hired (Active) Employee and
enter the employee's information. Double click in the Things-to-Do
box on the line that states "Send DOL General Notice to . . ." and
the letter will be produced. Since all employees should have been
provided this notification at some time; if you cannot prove they
receive it you should send another and place a copy in their file.
(Once printed, the letter will be saved in the employee’s digital
File Cabinet.)
The COBRA Qualifying Event Letter is the notice sent when an
employee/dependent experiences a qualifying event. This letter explains
a qualified beneficiary’s COBRA rights as well as detailing the
cost for coverage and the enrollment procedures. Anytime you remove
someone from the insurance plan, you should examine if a qualifying
event has occurred. If so, you need to send a Qualifying Event Letter.
To produce the Qualifying Event Letter in the software, click the
File Menu followed by the New COBRA Qualifier option. Enter the
information on both the employee and covered dependents. (If the
employee elected not to cover his/her dependents on any group plans,
do not enter them into the system.) Once completed, the Things-to-Do
list will state "Send DOL Qualifying Event Letter to . . .” Double
click on that line in the list and the letter will be produced,
importing the information specific to the qualified beneficiary.
This notice must be sent within forty-four days of the later of
the qualifying event date or the date coverage is lost. (Employers
using a Third Party Administrator must provide notice within thirty
days to the TPA and then the TPA has fourteen days to produce and
send the letter.)
The Conversion Notification explains a qualified beneficiary's
right when they lose coverage at the end of their COBRA term. Not
all plans offer a conversion right and the appropriate box should
be checked under the insurance plan information screen. If your
plan offers a conversion privilege, the system will track a COBRA
Participant's coverage and 180 days prior to the end of their COBRA
time frame, a line in the Things-to-do box will advise you to send
this notification. A conversion policy is an individual plan whereby
the employee/dependent does not have to qualify (by medical underwriting)
for coverage. Usually, conversion policies are age-rated and have
higher rates than standard individual plans. We have seen a trend
of insurers to eliminate conversion plans after the passage of the
Affordable Care Act which provides plans with no pre-existing condition
limitations.
As insurance plans renew, they have different monthly premiums.
Plan Administrators are required to notify Participants of the new
rates and their rights during Open Enrollment. Participants should
be granted the same rights as “similarly-situated” active employees.
Therefore, if active employees are allowed to change, add or terminate
plans, Participants should be allowed the same rights. During Open
Enrollment, most plans offer the ability to add/remove dependents.
COBRA Participants should be offered this right as well but any
added dependents added do not receive the rights of qualified beneficiary.
To produce Open Enrollment letters in the software, click the “Produce
Open Enrollment Letters” under the Events Menu. Enter the renewal
date, select the plans the Participants are eligible followed by
selecting all the participants. Lastly, enter the date you need
the Enrollment Forms from the Participants and click the Print button.
If a Participant sends a payment that is short by an “insignificant”
amount, Plan Administrators are required to notify the Participant
and make arrangements to make up the payment. The law defines a
payment being “insignificantly” short if you receive a minimum of
90% of the monthly premium when the premium is less than $500. For
monthly premiums over $500, if the payment is short by $50 or less
than it is considered “insignificant.” Plan Administrators are allowed
to accept the check as payment in full or send a notice detailing
the short payment. The software will notify the user when a payment
is short by an insignificant amount and places an item in the Things-to-do
list to send the letter.
The Unavailability of COBRA notification is sent to former qualified
beneficiaries who are not eligible to continue under COBRA. For
example, a spouse contacts the Plan Administrator ninety days after
his/her divorce of their desire to continue coverage. The law provides
sixty days for the qualified beneficiary to notify the Plan Administrator;
therefore the person did not meet the deadline and have become ineligible
for continuation coverage. In the past, the individual would be
under the assumption they had coverage (until they submitted a claim
and it was denied). For this reason the Department of Labor (DOL)
requires Plan Administrators to send a notification explaining they
were not re-activated and they do not have coverage. To create this
notification, select FILE/Other Unique Files/Individual Ineligible
for COBRA/New File. Enter the individual’s information and save.
The Things-to-do box will notify you to send the Unavailability
of COBRA notice.
In the event you are removing a qualified beneficiary from the
group plan (voluntarily or not) prior to the end of their COBRA
time frame, the 2004 Final Regulations require you send a termination
notice. The software has always produced these notifications and
you will be prompted in the Things-to-do box after terminating their
coverage. Produce the letter and send as soon as possible (because
time frames will vary based upon the type of termination experienced).
If the employer is terminating one or more group health plans without
replacing them, COBRA Participant’s should be notified. Since the
facts of this form of plan termination differ among employers, the
system will NOT produce a template letter. Plan Administrators will
be responsible for creating and distributing a notice.
COBRA Acceptance - The natural progression of events is Active
employees and/or covered dependents become qualified beneficiaries
who then become COBRA Participants (when they agree to pay for premiums
for continuation coverage). As part of the COBRA Qualifying Event
Letter, a Summary and Election Form is provided so the qualifier
may notify the Plan Administrator of their desire to continue coverage.
If you receive this form or are contacted directly, you should have
them complete a COBRA application for the insurance carrier(s) and
notify the software so it may set-up a billing account. Qualifiers
have sixty days from the later of date they lose coverage or the
date on the Qualifying Event Letter to notify you of their desire
to accept COBRA.
Since COBRA coverage is continuation coverage, you must add them
back onto the group plan with no lapse in coverage. It is recommended
you do not reinstate coverage until you have received the first
premium payment. This could mean going back a few months to retro-actively
add them back onto the plan(s). There is one exception when you
would not retro-actively enroll the qualifier and that is when the
employee removes a dependent from the plan "in anticipation of a
future qualifying event." The most common situation is when an employee
removes a spouse and later they are divorced. In that situation,
you would offer COBRA to the spouse effective on the date of the
divorce.
The most important procedure with COBRA administration is to
document or have a paper trail of all COBRA-related events. A 2006
court case demonstrated the importance of maintaining a copy of
sent notifications (which the software stores in its digital file
cabinet) as well as a log detailing all notifications sent, when
they were placed in the mail and have the administrator initial
it was mailed. The software has a Proof of Mailing Form that should
be completed on a daily basis and maintained in a log book. Another
form of proof is to scan the postmarked envelope and save the copy
to the qualified beneficiary file cabinet.
Q: Are Participants required to pay monthly premiums?
A: Once a qualifier elects COBRA and becomes a participant,
they are required to make payments to your organization. Premiums
are based upon the group rates your firm is charged (plus a two
percent administrative fee to help cover postage/administrative
costs). The participant is required to make payments in a timely
fashion. They have a forty-five day grace period to make their initial
premium payment. Thereafter, they have a thirty-day grace period.
If they do not pay within these time frames, you may terminate their
coverage. The software tracks payments and notifies you when someone
has not paid in a timely fashion. Once notified, you should prepare
the termination notice and then terminate them from the plan effective
the last day premiums were paid through. You will want to make sure
you notify the insurance companies as soon as possible because most
of them have implemented a maximum retro-termination policy, only
allowing you to receive premium credits back sixty.
There will be times when participants will not pay you prior
to the company submitting group premiums to the insurance carriers.
If you have not received COBRA payments, it is recommended you do
not pay the carrier for their premiums.
Q: What is a disability extension?
A: If
a qualified beneficiary is disabled on a date that is earlier than
the 61st day under COBRA and later considered “disabled” by Social
Security Administration (SSA), the law provides for that individual
and all others covered under the same policy to extend their coverage
from eighteen to twenty-nine months. To receive the extension, qualified
beneficiaries must provide the SSA determination to the Plan Administrator
within 60 days of the notice’s date and prior to the end of the
18 month continuation period. This eleven month extension comes
with a price. Employers may (or may not) charge a fifty percent
administration fee during this extension. The software will make
the necessary change to premiums, automatically.
Q: What is a Multiple Qualifying Event?
A:
If an employee initially experiences a termination of employment
or reduction in work hours and later a covered dependent experiences
another (or “multiple”) qualifying event, the dependent should be
offered the right to continue up to thirty-six months from the original
COBRA start date. In the software, click the Events Menu followed
by the Multiple Qualifying Event option. Enter the information on
the qualifier and the system will create a new billing account for
them and produce a letter explaining their rights. (If employment
termination follows a reduction in work hours, the law does not
consider it a multiple qualifying event; therefore the qualified
beneficiary would only receive the eighteen months continuation
coverage offered upon the reduction of work hours.)
This is a very brief summary of COBRA. The actual law is hundreds
of pages and is very complex. We appreciate your confidence in our
software and hope that we can continue to provide you with useful
information to assist with maintaining your COBRA compliance. Our
goal is to keep you informed about COBRA, proposed legislation and
the operation of our software. If you have any recommendations as
to content of these monthly newsletters or software enhancements,
feel free to email us at help@csisupport.com.
Correcting Failures when Offering COBRA
COBRAinReview:
Quarter 3, 2019
When a COBRA administrator discovers a failure to offer COBRA
coverage they should take immediate steps to correct the mistake
to avoid such penalties as ERISA ($110 per day), IRS excise tax
and lawsuits.
Code Section 4980B imposes an excise tax on failures unless an
employer has not received an audit letter from the IRS and the failure
is due to reasonable cause, as opposed to willful neglect, and remedied
within 30 days after any person liable for the tax is aware of the
failure to comply with COBRA. A COBRA failure is considered corrected
when retroactively undone to the degree that any affected beneficiary
is restored to the same financial position as the beneficiary would
have been had the failure not taken place. The code requires that
the qualified beneficiary is offered the election of the most favorable
coverage with regards to the medical expenses incurred after the
failure occurred. In this case, the term beneficiary also implies
reference to the qualified beneficiary’s estate.
Keep in mind the employer is liable for all expenses incurred
by the employee due to the employer’s failure to comply with
COBRA. This means that according to IRS’s COBRA Examination
User’s Guide it may involve determining whether the complaining
individual had been “made whole.”
Judicial standards as reported in past decisions in terms of
assessing retroactive corrections of COBRA failures offer valuable
insight as to what constitutes proper correction of COBRA failures.
Generally the corrections involve providing:
- the benefits that should have been paid to a qualified beneficiary
for already-incurred medical expenses, less applicable COBRA
premiums;
- coverage for remaining portion of the maximum coverage period;
and
- attorneys’ fees and interest.
As for implementing measures to correct failures there are no
simple solutions that will work in every situation. However, the
following options appear to satisfy the Code’s requirements
that qualified beneficiaries are to be restored to the position
they would have been in if COBRA coverage had been properly offered:
In the event that a plan administrator has failed to offer COBRA
coverage the notice should be provided. In the event the notice
was inadequate it should be provided again – one possibility
is to provide the notice again with open enrollment materials. If
the qualified beneficiary is within the election period and it is
discovered that the election notice was not sent, then the plan
administrator should re-send the notice. However, if it is outside
the election period and there is solid proof that the notice was
sent to the last known address, then the plan administrator may
decide not to provide a second notice. In regards to a notice of
unavailability or termination notice, even though these notices
basically inform the qualified beneficiaries that they will not
have coverage, a new one should be provided if missed. Providing
a notice could stop the penalty period from running.
When retroactive COBRA coverage is necessary, offer to pay all
covered claims that have been charged to date, or if earlier, the
expiration of the applicable maximum coverage period whether it
be 18,29, or 36 months from the qualifying event. Keep in mind,
however, that each qualified beneficiary should be given the choice
to elect the period of retroactive COBRA coverage. For example,
if the employee wants to end coverage prior to the expiration of
the full period, the employer cannot demand payment for the full
retroactive period. Also, ensure that all beneficiaries are clearly
notified that this offer is for retroactive coverage only as it
can easily be assumed that they are being offered prospective coverage.
If the COBRA election notice is very late or the maximum coverage
period has already expired, you may consider offering some sort
of prospective coverage. While this offer would seem to go beyond
what COBRA requires, it may mitigate complaints that necessary medical
attention was passed up due to lack of proper coverage being offered;
it can be argued that retroactive coverage does nothing to make
up for lost health care treatment.
As for collecting the initial payment premium, there are conflicting
arguments - be careful about demanding one lump sum. There has been
at least one case where the qualified beneficiary was still allowed
to make monthly payments while the employer was required to provide
the full retroactive coverage. On the other hand, there have been
at least two court cases to permit the request for a lump sum although
neither case directly considered the question. The Ninth Circuit
has upheld a decision that required payment for retroactive premiums
to be collected in a lump sum (Chaganti v. Ceridian Benefits Servs.,
Inc., 2006 WI. 3431753 (9th Cir. 2006). But it should also be noted
that the 1999 final IRS COBRA regulations provide that plans may
permit qualified beneficiaries to make payments at other intervals
such as weekly, monthly, quarterly and semi-annually so it could
be easy to assume this requirement would also hold true in the case
where a COBRA notice was late due to the failure of a plan administrator.
In one court case, the employer’s demand for a lump sum payment
was upheld, however large statutory penalties were awarded to the
qualified beneficiary.
In the case of conversion coverage that might have been elected
if not for the failure to offer, consider offering conversion coverage
beginning with the expiration of COBRA coverage if permitted by
insurance carrier. Also be careful not to limit claims filing deadlines
for expenses incurred before the correction. And in the case of
a qualified beneficiary becoming covered by another group health
plan, according to one court case, it concluded that the plan should
still offer COBRA coverage as a curative matter even if this means
the opportunity for dual coverage. Until the plan administrator
corrects the election notice failure, the fact that the qualified
beneficiary has become covered under another plan, does not relieve
the obligation to offer COBRA coverage.
In any event, it is probably not wise to use standard election
notices and forms in the case of a correction, especially one that
is very late. It would be best to customize written notices for
the specific situation to avoid confusion and future litigation.
Ultimately, if a qualified beneficiary refuses the appropriate offer
for retroactive coverage they lose any claim for COBRA.
For those
Insured or Self –Insured plans with Stop-loss Insurance the
employer needs to work with the insurer to make sure they will provide
the coverage that is being offered. Also, an employer that is held
liable for violating COBRA, should investigate whether this could
be covered under its liability policy, and the decision to correct
the failure should be made in accordance with the liability policy’s
notice provisions and guidance.
In the case of withdrawing offers of COBRA coverage the plan
administrator should look at the strengths of their position based
on a review of COBRA documents such as the election notice, the
initial notice, the SPD, the plan document, the plan’s insurance
contract and any other pertinent communication documents. Looking
at past practices will also be critical as this alone can determine
the obligations even when the law does not. And lastly, look at
the facts. Were specific representations made to the claimant? Should
the claimant have understood the coverage was mistakenly offered?
Were there any misrepresentations by the claimant in order to gain
coverage? It is advisable to seek counsel to make certain the legality
of the decision to withdraw coverage retroactively is substantiated.
Gross Misconduct Can Void COBRA Rights
COBRAinReview:
Quarter 3, 2019
In the court case, Gilson v. Pennsylvania State Police, 2016
WL 1237351 (W.D. Pa., March 30, 2016), a federal district court
in Pennsylvania ruled that the plaintiff, William Gilson, was appropriately
denied the option of COBRA coverage due to his termination of employment
for “gross misconduct.” Although the term “gross
misconduct” is not clearly defined in COBRA statute, therefore
being rather ambiguous to affirm, courts generally look to state
unemployment law in making their determination of whether a termination
occurred by actions that escalated to the level of “willful
misconduct.” In this case, state trooper Gilson’s actions
of sexual misconduct and deception were found to be just cause for
the negation of his COBRA rights.
The facts of the case are as follows: As an employee of the Pennsylvania
State Police (PSP) Gilson, along with several other officers, were
called to an incident in August of 2009 where a female crisis service
worker was also present. She alleged that Gilson touched her inappropriately,
claiming he placed his arm around her waist and pulled her toward
him. There was at least one other officer that corroborated this
violation. Disciplinary and arbitration proceedings ensued which
found that Gilson lied several times about the facts of his actions.
Consequently, it was determined that Gilson had indeed violated
the PSP’s regulations prohibiting police officers from engaging
in sexual misconduct/harassment and was thereby given a notice of
termination in November of 2010. After an arbitrator upheld PSP’s
decision, Gilson was terminated on May, 2, 2011 and given no option
of COBRA coverage by PSP because of his gross misconduct.
Gilson decided to sue PSP as well as several individuals, claiming
his COBRA rights under the Public Health Service were violated.
Because the COBRA statute does not contain an actual definition
of what “gross misconduct” means, the court chose to
take the lead from the standards set by the state in terms of unemployment
compensation. So in this case, the court noted that under Pennsylvania
law discharges resulting in willful misconduct connected with work
disqualifies an individual from receiving unemployment benefits.
It was therefore determined that for COBRA purposes, Gilson’s
actions would also constitute “willful misconduct” thereby
taking away his COBRA rights.
Gilson fought back. Ironically,
in this case, he was actually awarded state unemployment compensation,
therefore bringing into question whether his actions did comprise
the willful misconduct standards. Gilson argued that the unemployment
office determined that the August 2009 incident “was not sufficiently
related in time” to the notice of termination in November
2010. Because of that, the unemployment office could not say for
certain that his termination was caused by the PSP rule violation.
However, the court noted that just because the unemployment office
may have had a hard time with the timing issue, it did not rule
out the fact that Gilson’s inappropriate physical contact
and “serious act of deception” was deemed “gross
misconduct.” Subsequently, the court ruled in favor of the
defendants.
In this author’s opinion, employers should be very cautious
when considering a gross misconduct decision. Because of the lack
of a clear-cut definition in the COBRA statute, this a judgment
call that should be well thought out and documented to avoid costly
litigation. Remember laws vary from state to state. Not all legal
verbiage in one jurisdiction can be applied across the board. Taking
a good look at relevant cases in your locality may offer helpful
guidelines.
FMLA and COBRA
COBRAinReview:
Quarter 2, 2019
The connection between COBRA and Family and Medical Leave Act
(FMLA) can be confusing. Plan administrators need to understand
that although going on leave under FMLA does not necessarily trigger
a COBRA qualifying event, the failure of an employee to return to
work after exhausting his FMLA leave could create a qualifying event
if it causes a loss of coverage. An employer is not obliged to extend
the benefits of FMLA even if the individual remains an employee
during sick or short-term disability leave.
In a recent case a firefighter was not able to return to work
after exhausting his FMLA leave although he remained an employee
because of the sick leave hours he accumulated after years of employment.
He filed a lawsuit against the City claiming the City violated COBRA
when it cancelled his insurance benefits.
The case is Neal v.
City of Danville, Virginia, 2014 WL 7011123 (W. D. Va. Dec. 11,
2014)
Barry Neal, a firefighter for the City of Danville, was injured
on Feb. 1, 2013 in a non-work related accident. Neal used about
2,000 hours of paid sick leave that he had accumulated since he
began working for the City of Danville in April 1987. Contrary to
Neal’s choice, the city put Neal on FMLA on Feb. 15, 2013,
although he remained covered under the City’s health plan
as he continued to use his accrued sick leave hours.
The City sent Neal a COBRA election notice after he exhausted
his 12 week FMLA and he was still unable to return to work. The
City told him his health insurance benefits would be cancelled according
to the City’s FMLA policy which states “in all cases,
at the point of FMLA leave exhaustion, the employee’s benefits
will be subject to COBRA and/or direct billing, as applicable, based
upon the benefit.” Neal elected COBRA after he exhausted his
FMLA leave and paid approximately $1,872 in COBRA premiums.
On July 17, 2013 Neal was medically cleared to return to work
and the City reinstated his group health benefits. Neal then decided
to sue the City stating that since no qualifying event occurred,
the city violated COBRA when they cancelled his benefits. The City
argued that a qualifying event did occur – they felt that
Neal’s use of sick leave was a reduction in work hours that
he actually worked, thereby creating a qualifying event and a loss
of coverage.
The court stated the reduction in work hours applies in this
case since COBRA states that a reduction in work hours occurs, “whenever
there is a decrease in the hours that a covered employee actually
works.” In Neal’s case, after he exhausted his FMLA
leave, the number of hours he worked decreased to zero. Also the
court stated that the City’s policy clearly states that an
employee’s group health insurance benefits be terminated if
the employee fails to return to work following 12 weeks of FMLA
leave. The court decided that both of these facts support the City’s
action in providing Neal with COBRA continuing coverage. The court
stated that Neal’s claim that paid sick leave is equivalent
to FMLA leave did not hold up, noting that COBRA regulations state
that absence from work for any reason “other than due to leave
that is FMLA leave” is a reduction in work hours. The court
contended that FMLA regulations clearly provide that an employer
is not obligated to extend the benefits of FMLA if it has a greater
leave policy than mandated by the act. It was determined that the
City was under no legal obligation to extend the benefits elemental
to FMLA leave to Neal’s paid sick leave in excess of twelve
weeks.
In this author’s opinion: This case shows that an employer
is not obligated to extend FMLA leave benefits beyond twelve weeks
even when an employee has accumulated paid sick leave. The fact
that the employee remained on sick leave until returning to full
time employment did not affect the result. It is important for employers
to make sure their leave policies reflect the connection between
COBRA and other extended coverage such as FMLA.
Issues with Insurance Carriers
COBRAinReview:
Quarter 2, 2019
The following questions are examples of difficult situations
that often arise between major insurers and employers along with
possible solutions for a positive outcome:
What if the Insurer is denying COBRA?
First
of all, the employer should confirm that the COBRA election notice
was sent within the proper time frame. Keep in mind the COBRA statute
states, “the employer of an employee under a plan must notify
the plan administrator of a Qualifying Event with 30 days of the
Qualifying Event.” Furthermore, the statute also requires
the plan administrator to notify any qualified beneficiary, with
respect to an event, within 14 days of the date on which the employer
notifies the plan administrator of the date.
In the event that the employer failed to send the election notice
within the proper time frame then the insurer can deny COBRA coverage.
This means the employer will become self-insured for any and all
claims made during the full 18, 29, or 36 month COBBRA coverage
period. If confirmation can be made that the election notice was
sent in a timely manner and everything was done correctly then the
following steps should be taken:
- Obtain the specific reason the insurer is denying coverage
- Provide documentation of your COBRA compliance along with
applicable legal guidance. These can be found in either the
notice regulations issued by the U.S. Department of Labor (DOL)
in 2004, or the COBRA regulations issued by IRS in 1999 and
2001.
- Examine the COBRA language in the insurance contract and
policy – specifically find the part that outlines what
obligates the insurer to comply with COBRA.
What if the Insurer is denying an Extension of Coverage?
The first thing to do is make sure the qualified beneficiary was
properly notified of their 60-day responsibility to notify the plan
of a secondary event. The notice must include who should be notified
and in what manner. Remember that until a qualified beneficiary
has been notified the “clock does not start ticking.”
In order to ensure the extension will be accepted, the employer
should first obtain the specific reason for the denial from the
employer and then:
- Submit documentation proving the proper time frame was met
- Submit documentation received from the qualified beneficiary
- Provide the DOL’s 2004 final regulations.
In summary, timing is of the utmost importance when dealing with
COBRA. In this author’s opinion employers must work in conjunction
with insurance carriers to ensure all rules and regulations are
followed. Otherwise, the employer will run the risk of becoming
self-insured which could be potentially devastating financially.
How does COBRA and Medicare Interact?
COBRAinReview:
Quarter 1, 2019
COBRA Solutions has been answering questions regarding COBRA
since 1991 and we are often asked, “What is the most common
question regarding COBRA?” It is actually a very easy question
to answer; how Medicare and COBRA interact. This COBRAinReview will
discuss COBRA and Medicare and how to administer COBRA correctly.
There are six situations where COBRA and Medicare interact and
have been interpreted completely different throughout COBRA’s
existence. Keep in mind; you cannot use logic when discussing COBRA
and Medicare’s interaction. You also will have a difficult
time finding confirming information on the internet. Quite frankly,
there are many situations where administrative procedures don’t
seem logical. Let’s examine those six COBRA and Medicare interactions.
- Employee’s Medicare Entitlement While Continuing
to Work
Not all employees retire at age 65. Many want to continue
working but over the years the cost for group coverage has increased
to the point many Medicare Entitled employees wish to drop their
group coverage and obtain a Medicare Supplement Insurance plan.
(And, due to MSP rules, employers may not terminate employee
coverage because of Medicare Entitlement.) Although it was once
considered a COBRA Qualifying Event for covered dependents,
today’s interpretation is that the employee would be voluntarily
cancelling his/her group insurance and therefore dependents
should not be offered COBRA because coverage is not “involuntarily”
lost.
In a situation where an employee voluntarily removes him/herself
from a plan, it is recommend to see if they have dependents
on their plan. Prior to contacting the insurer to remove the
employee, have a conversation to let them know their dependents
will be terminated along with them and will not be offered COBRA.
Some employers will have the employee sign a form stating he/she
understands this consequence if they still wish to cancel coverage.
In the COBRA software, you would enter this individual under
File > Other Unique Files > Active Employee Voluntary
Removal From Group Plan > New File. Enter the employee’s
information and the system will place the Voluntary Removal
Letter in the Things-to do list. Although not required by COBRA,
it is recommended you send this notification so dependents know
their coverage has been cancelled.
- Medicare as a Multiple Qualifying Event
Once a COBRA Participant has started on COBRA and then becomes
Entitled to Medicare, has a “multiple COBRA Qualifying
Event” occurred? We know that Medicare Entitlement is
a reason for COBRA termination but what about covered Qualified
Beneficiaries? Prior to 2004, it was deemed as a qualifying
event and covered dependents were offered up to thirty-six months
of continuation coverage. But with Rev. Ruling 2004-22, 2004-10
I.R.B. 553, the Internal Revenue Service determined that a COBRA
Participant’s Medicare Entitlement will rarely be considered
a multiple qualifying event. They stated that under MSP (Medicare
Secondary Payer) rules, group health plans are unable to terminate
covered dependent’s coverage; therefore there they should
not experience a loss of coverage.
If a COBRA Participant becomes Entitled to Medicare, you
will want to remove them from continuation coverage. Follow
the steps below in the software to correctly remove them:
-
a) Under the Events menu, select the “Remove Individual
from Participant’s Plan > New File.”;
-
b) Select the COBRA Participant subscriber file from
the dropdown list;
-
c) Select the individual that became Entitled to Medicare;
-
d) Verify the Participant’s address and enter the
last day the individual should be on the plan;
-
e) Select the plan(s) that the individual should be removed
from; and
-
f) Click the Ok button.
If the system cannot automatically determine, you may then
be asked what tier/coverage type the remaining COBRA Participants
will have after the removal of the individual. After the removal
you will want to verify the billing information. The system
will prompt you to send a notification informing the individual
of their removal from the plan in the Things-to-do list. Double
click on it and send the notification via USPS first class mail.
Lastly, if there was a tier/coverage type change, you will want
to send new coupons (or a letter detailing the new rates) to
the remaining covered individuals.
- “Special Medicare Rule”
Just when you thought you knew everything about how COBRA
and Medicare interact, ERISA Section 602(2)(A)(vii) [and Treasury
Regulation Section 54.4980B-7 Q?A -4(d)(1) ] changes everything.
These sections of the law state the if an active employee is
terminated (voluntarily or involuntarily) or experiences a reduction
in work hours where there is a loss of coverage within 18 months
of the employee’s Entitlement to Medicare;
a) The employee should be offered the right to continue coverage
for 18 months; but
b) Covered dependents should be offered
thirty-six months calculated from the date of the employee’s
Entitlement to Medicare.
The COBRA Administration Manager reviews the age of the employee
at the time of the Qualifying Event and notifies the user when
the employee is terminated or loses coverage to a reduction
in work hours. The system will then create a COBRA Participant
file for the employee providing 18 months of coverage and another
file for the dependents. The dependent’s COBRA end date
will be calculated by adding thirty-six months to the employee’
Medicare Entitlement date. You will notice that the system will
change the number of months for COBRA to match the end date
that was calculated. This number could be calculated to be between
19 and 36. Do not change it or it will change the correct COBRA
end date.
- COBRA Participant Becomes Entitled to Medicare
As we explained earlier, Medicare Entitlement is rarely considered
a multiple qualifying event. When either an employee (or dependent
of) is effective on COBRA and later becomes Entitled to Medicare,
that individual “can” be terminated from continuation
coverage. We are using the word “can” be terminated
because by law they should be terminated from continuation coverage
but we have found many Administrators allow these individuals
to continue ancillary plans (i.e. dental, vision, etc.) if the
carrier agrees to continue coverage.
Your COBRA software will notify you when individuals reach
age 65 and become Entitled to Medicare. Please follow the instructions
found under item #2 to remove them from continuation coverage.
- Medicare Entitled Active Employee Experiences Qualifying
Event
Should an active employee age 65+ (who is enrolled under
Medicare) be offered COBRA when they are terminated or lose
coverage due to reduced work hours? In the previous paragraph
we described how individuals should be remove when they are
enrolled on COBRA and become eligible for Medicare so it only
makes sense that you would not offer a Medicare covered employee
COBRA when they experience a qualifying event. WRONG. The law
states that the employer-sponsored plan may cover items that
Medicare does not. For this reason, employers must offer these
individuals COBRA continuation.
- COBRA Participant Receives “Disability
Extension”
Although not directly related to Medicare, the reason
for allowing a disabled COBRA Participant an additional eleven
months of continuation coverage is to provide time to obtain
Medicare. If a Qualified Beneficiary is deemed disabled prior
to their sixtieth day on COBRA, notified the Administrator within
sixty days of Social Security Administration’s (SSA) Disability
Determination and provides that determination prior to the end
of their 18 months on COBRA, they should be offered an eleven
month Disability Extension. All members of the family unit should
be granted the extension as well. If the disabled individual
is no longer considered by SSA or becomes Entitled to Medicare,
they may be removed from the plan.
Hopefully this description of COBRA and Medicare interaction
will aide you in your administration. Please refer to it when you
come across one of the above scenarios. If you are still unsure,
feel free to call COBRA solutions for assistance.