New COBRA Notices & Extended Deadlines May Create Traps for the Unwary: Benefits Guidance in the Time of COVID-19
The economic downturn caused by COVID-19 pandemic has resulted in an unprecedented number of layoffs, furloughs, and reduced hours. Under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), when employment is terminated or hours are reduced and there is a loss of coverage, employers (generally those with 20 or more employees) must provide notices to covered employees and their covered spouses and dependent children explaining that they have the right to elect to continue receive health care coverage. In addition, when a covered employee dies, COBRA requires employers to notify the employee’s spouse and dependent children that they have the right to elect to continue health coverage. On May 1, 2020, the Department of Labor (“DOL”) issued a new model general notice and election notice (“Notices”) for the purpose of providing more information about how Medicare and COBRA interact. In Frequently Asked Questions, issued with the Notices, the DOL states that employers may use the Notices to satisfy their COBRA notice obligations.
The Notices, however, do not address the joint DOL and Treasury COVID-19 guidance issued on April 29, 2020, which effectively extends the deadlines for issuing notices and making elections for certain health and welfare plan actions and notices, by excluding the “Outbreak Period,” – i.e., the period between March 1, 2020, (the beginning of the COVID-19 national emergency declared by the president) and 60 days after the announcement of the end of the COVID-19 national emergency (or such other date announced by the DOL in a future notice). Specifically, the April 29 guidance states that group health plans must disregard the Outbreak Period when determining:
The 60-day deadlines for individuals to elect COBRA continuation coverage;
The deadlines for individuals to make COBRA premium payments; and
The deadlines for individuals to notify the plan of certain qualifying events (such as divorce or a dependent child aging out of plan coverage) or determination of disability as it relates to COBRA coverage.
In addition, the April 29 guidance states that group health plan sponsors and administrators may disregard the Outbreak Period when determining the date for providing a COBRA election notice, which would normally be within 14 days after the plan receives notice of a qualifying event, or within 44 days where the employer is the plan administrator.
At this time, it is not entirely clear whether employers should revise their COBRA notices to reflect the extended deadlines set forth in the April 29 guidance, or simply use the Notices that the DOL issued two days later. Since the updated model notices were issued only two days after the April 29 guidance was released, it appears that employers may not be required to update their notices. Future DOL guidance may address this.
Meanwhile, in light of the massive unemployment and loss of health care coverage, caused by the COVID-19 crisis, COBRA coverage changes appear to be on the horizon. House Democrats have proposed the Worker Health Coverage Protection Act, H.R. 6514, which, as explained here, seeks to provide a COBRA subsidy for up to 15 months to cover 100% of the health premiums owed by unemployed and furloughed workers and, if enacted, would require employers to provide notices that include information about the availability of premium assistance. The bill is currently in committee. If Congress adopts this legislation, the May 1, 2020 model notices may soon become obsolete.
Employers planning layoffs and furloughs should review the May 1, 2020 model Notices and the April 29 guidance with their third-party administrators, insurance providers, and legal counsel, and monitor the status of H.R. 6514, to ensure compliance. As discussed here, there has been a wave of class action lawsuits alleging that employers and health plans failed to provide adequate COBRA election notices to employees.