In the first six months of COVID-19 outbreak, more than 60 million Americans filed for unemployment. A recent report by the U.S. Department of Labor (DOL) suggests that
While Congress has passed a variety of economic stimulus legislation to help lessen the impact of COVID (most notably the CARES Act in March 2020), the huge number of
Why worry?
Simply put: there’s no end in sight. The final notice rule published by the IRS, DOL, and other federal agencies back in April states that group health plans and other employee welfare benefit plans subject to ERISA or the Internal Revenue Code cannot include the period from March 1, 2020 until 60 days after the announced end of the National Emergency (otherwise known as the “Outbreak Period”) in determining the following:
- 30-day period (or 60-day, if applicable) for special enrollment under ERISA
- 60-day election period for COBRA continuation coverage
- Due date for making COBRA premium payments
- Date for people to notify the plan of a qualifying event
- Date a group health plan sponsor or administrator has to provide a COBRA election notice
With no foreseeable end date to the “Outbreak Period,” the current layoff situation and legislative action to extend periods and deadlines associated with COBRA means that people who would not have considered electing COBRA prior to COVID-19 may choose to do so soon, and in record numbers. The potential COBRA avalanche could result in unprecedented burdens for employers and COBRA administrators due to deferred election notices, much longer election windows and deferred payments.
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Ultimately, qualified beneficiaries who defer will likely have a massive premium bill after all has been said and done. What happens if they cannot pay? To whom will the insurance carriers look to settle the unpaid premiums? Employers should prepare for this potential pitfall by consulting with their brokers, carriers, plan providers, and legal counsel to develop strategies and action plans.
COBRA compliance
Perhaps the most complicated and frightening aspect is the potential for penalties resulting from failure to meet COBRA compliance requirements. Currently, employers face fines of up to $110 per day, and excise tax penalties of up to $200 per day, for failure to comply.
What can administrators do to head off the possible consequences of a COBRA avalanche?
Update your COBRA notices: Consult your legal counsel about your COBRA notices. Verify that your notices cover the necessary information for employees, qualified beneficiaries, obligations, information on when and how to elect COBRA, and how to make payments. Another consideration is sending a separate communication that alerts COBRA notice recipients about the extended deadlines.
Talk with your legal counsel, plan provider, and employer clients: Making sure everyone is on the same page and addressing compliance concerns can ease a lot of worries. Another talking point with employer clients is your services agreement and fee structure, as the COBRA workload could significantly increase.
Review your COBRA administration solution: How does your solution handle extended deadlines? How easy is it to process a COBRA declination, then add a beneficiary back beyond the traditional 60-day window? Will the solution provider work with your needs – particularly if you have a large quantity of unresolved lives in the system?
Reflect on your internal business practices: Finally, do you have the staff or support services to handle the COBRA avalanche? How do you send out notices currently — does your staff handle that or do you use fulfillment mailing services? Who answers the phone calls and responds to emails from participants and beneficiaries? During these stressful and uncertain times, people need reassurance that they have the information and understand their options to make their healthcare decisions.
With the COVID-19 period far from over and layoffs continuing to make waves in the labor force, a COBRA avalanche may be coming. Anticipation and preparation can help keep you from getting buried.
