The Department of Labor (“DOL”) and other federal agencies released updated model COBRA notices and expanded COBRA deadlines in an effort to reduce the risk of participants and beneficiaries losing benefits during the COVID-19 pandemic.
Updated Model COBRA Notices
Under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), an individual who was covered by a group health plan on the day before the occurrence of a qualification event, i.e. termination of employment or a reduction in hours that results in loss of coverage under the plan, may be able to elect COBRA continuation coverage upon that qualifying event. Under COBRA, group health plans must provide covered employees and their families certain notices explaining their COBRA rights. The first is a written notice of COBRA rights, called a “general notice,” which is given to an employee and spouse at the time of commencement of coverage. A group health plan must also provide an employee and spouse with an “election notice” upon a qualifying event, which outlines how to make an election under COBRA continuation coverage. The DOL has created model notices, which plans can use to satisfy these requirements under COBRA.
On May 1, 2020, the DOL updated its model notices to specifically address the interactions between Medicare and COBRA. The primary update to the DOL model notice includes a new Question & Answer Section, which addresses whether employees can enroll in Medicare after group health plan coverage ends. Q2 specifically states the following:
In general, if you don’t enroll in Medicare Part A or B when you are first eligible because you are still employed, after the Medicare initial enrollment period, you have an 8- month special enrollment period to sign up for Medicare Part A or B, beginning on the earlier of 1) the month after your employment ends; or 2) the month after group health plan coverage based on current employment ends. If you don’t enroll in Medicare and elect COBRA continuation coverage instead, you may have to pay a Part B late enrollment penalty and you may have a gap in coverage if you decide you want Part B later. If you elect COBRA continuation coverage and later enroll in Medicare Part A or B before the COBRA continuation coverage ends, the Plan may terminate your continuation coverage. However, if Medicare Part A or B is effective on or before the date of the COBRA election, COBRA coverage may not be discontinued on account of Medicare entitlement, even if you enroll in the other part of Medicare after the date of the election of COBRA coverage.
Additionally, if an employee is enrolled in both COBRA continuation coverage and Medicare, the DOL has stated that Medicare will generally act as the primary payor, and COBRA continuation coverage will pay second.
Employers are not required to follow the model notices. However, those that do will be deemed compliant with COBRA’s notice requirements. Due to the recent and rapid increase in class action litigation against employers based on allegations of improper COBRA notices, we strongly recommend that employers use the updated DOL model forms. For employers with a multilingual workforce, the notices are available in both English and Spanish.
Expansion of COBRA Deadlines
On May 4, 2020, the DOL and Internal Revenue Service issued a Joint Notice extending certain timeframes for a participant’s continuation of group health plan coverage under COBRA during the COVID-19 pandemic. Specifically, the Joint Notice expands the COBRA deadlines by requiring plans to disregard the period from March 1, 2020 until 60 days after the announced end of the National Emergency (known as the “Outbreak Period”). As a result, the 60-day timeframe that plan participants normally have to elect COBRA coverage after receiving the COBRA election notice does not begin to run until after the end of the Outbreak Period. Additionally, COBRA enrollees normally have 45 days from their COBRA election to make their first pension payment, and subsequent monthly payments must be made within a 30-day grace period that starts at the beginning of each coverage month. The new rule extends the 45-day initial payment and 30-day grace period deadlines beyond the Outbreak Period. Finally, the guidance makes clear that an employer or health insurance carrier cannot terminate coverage or reject any claims for nonpayment of premium during the Outbreak Period.
Although the Joint Notice also extends the typical 14-day time period within which an employer or sponsor must provide an election notice when it receives notice or has knowledge of a COBRA qualifying event, we strongly urge employers and sponsors to abide by those deadlines so that the employee and spouse are placed on notice. We also recommend that the attached COBRA Notices have a cover letter explaining the extended timelines. We caution employers and sponsors that these extensions will result in adverse selection against the Plan whereby participants who needed medical care over the Outbreak Period will opt for COBRA coverage and those that did not need medical care over the Outbreak Period will not.
The U.S. Department of Labor’s Employee Benefits Security Administration published updated COBRA model notices: