COVID-19 Outbreak Period Extension Gives Employees More Time to Change Health Insurance Coverage

One of the more confusing aspects of COVID-19-related benefit legislation is the notion of the outbreak period, which was announced by the Department of Labor (DOL) and Internal Revenue Service (IRS) last spring. The outbreak period was designed to give employees additional time to exercise their rights to change health coverage via the Health Insurance Portability and Accountability Act’s (HIPAA) special enrollment rights or to continue coverage under COBRA after job termination.

The outbreak period began March 1, 2020 and was set to end 60 days after the end of the declared national emergency. The national emergency expired as of February 28, 2021 and although President Biden has issued a letter to continue the national emergency, the timing of the notice means the benefit provisions we reported last spring are impacted.

The DOL issued Disaster Relief Notice 2021-01 to continue providing relief to employees seeking additional time to make elections. This is based on HIPAA’s special enrollments rights or to exercise their rights to COBRA. Unfortunately, this relief comes with an administrative burden for employers. Instead of the outbreak period being on the same timeline for all employees, it will now use a rolling 12-month timeframe on an individual-by-individual basis.

Individuals who experienced an event that led to a HIPAA special enrollment right or who were in their COBRA election window prior to March 1, 2020 would see the “pause” button end as of February 28, 2021. Any remaining time to elect or change benefits would recommence.

Individuals who experienced an event after March 1, 2020 would have up to 12 months of additional time to elect coverage or make changes based on that event date.

In the event President Biden declares an end to the national emergency prior to the individual’s additional 12-month period, the pause on those election timelines would end 60 days after the end of the National Emergency.

Example Scenarios for Benefits Plan Administrators

For illustrative purposes, we’ve created examples of applicable situations benefits plan administrators may encounter. These examples were shared last spring and have been updated based on this new guidance.

HIPAA Special Enrollment Rights

Employees have 30 days to request a change in enrollment if they or a dependent lose eligibility for other group health coverage or if the employee acquires a new spouse or dependent by marriage, birth, adoption or placement for adoption. Employees have 60 days to request a change in enrollment if they or a dependent gain or lose Medicaid or CHIP eligibility. If the request is made outside of that timeframe, it is generally not allowed.

This new guidance suspends these timeframes.

If an employee experiences one of the situations listed below any time between March 1, 2020 and the end of the national emergency, the timeframe to complete the requested change in coverage would not begin until the end of the individual’s 12-month outbreak period. This timeframe applies even if it is more than 30-60 days from the date of event.

For example, an employee has a baby on June 5, 2020. Traditionally the employee would have 30 days from this date to enroll the baby (and herself if not already enrolled) in the benefit plan. Now the employee would have 30 days until after the end of the individual outbreak period to enroll in coverage, making the new deadline July 5, 2021. If the employee did not enroll by July 5, 2021, she would need to wait until Open Enrollment.

Note: This timeframe extension only applies to situations classified as HIPAA Special Enrollments. All other qualifying life event situations retain their existing 30-60-day timeframe from date of event.

COBRA

This section only applies to group health plans that are subject to COBRA.

COBRA Notice from Employee to Employer

An employee or dependent is responsible for notifying the plan within 60 days of a divorce or legal separation causing the spouse to lose eligibility, or a child losing eligible dependent status (usually due to attaining age 26). Additionally, an individual already on COBRA must notify the plan within 60 days of a disability determination to extend the maximum coverage period from 18 to 29 months. This notification period will begin 60 days after the end of the individual’s outbreak period.

For example, a child loses dependent status on April 1, 2020 due to attaining age 26. Typically, the dependent would have 60 days to notify the plan in order to claim a COBRA right. The dependent now must notify the employer by May 31, 2021, which is 60 days after the end of the individual’s outbreak period.

COBRA Election Notice Deadline

Employers must notify qualified beneficiaries of their COBRA rights within 14 days after being notified of a qualifying event. This notification period will begin 60 days after the end of the individual’s outbreak period.

For example, an employee notifies their employer of a divorce on April 1, 2020. The employer would typically have 14 days from this date to provide the ex-spouse with a COBRA election notice. The employer would now have until May 31, 2021 to provide the election notice to the ex-spouse. Coverage would be retroactive back to April 1, 2020, but the premiums would have to be timely paid back to that date as well.

COBRA Election Period

Employees who lose coverage under a group health plan have 60 days after coverage terminates to elect to continue coverage under COBRA.

For example, an employee is furloughed and loses coverage under the group health plan on April 1, 2020. The employee would normally have until May 31, 2020 to elect coverage. Now the employee may elect coverage within 60 days of the end of the individual’s outbreak period. The employee has until May 31, 2021 to elect COBRA coverage. Coverage would be retroactive back to April 1, 2020 but the premiums would have to be paid back to that date as well.

COBRA Premium Payment Deadline

Employees who elect COBRA must pay the premiums within 30 days of the due date, with the exception of the initial premium, which may be paid within 45 days of election. COBRA premiums are typically due on the first day of each month, so the 30-day grace period typically goes through the end of the month.

For example, a former employee elected COBRA on July 1, 2020. Premiums are due by the first of the month, and no later than the 30-day grace period. The former employee stops paying premiums beginning in October 2020 and continues to not pay premiums. The former employee would have until July 31, 2021 (30 days after the end of the individual’s outbreak period) to pay premiums for October 2020 through July 2021 to be considered timely. If premiums are not paid after this date coverage would be cancelled retroactive back to the last month in which premiums were timely paid.

While this guidance gives flexibility to employers, we encourage you to continue to issue notices and paperwork in a timely manner if possible. We anticipate COBRA administrators may face challenges administering these extended deadlines.

Benefits Claims Deadlines

Benefit Claims Deadlines

Each benefit plan specifies the period in which an individual can file a benefit claim. The claim filing deadline will disregard the Outbreak Period.

For example, the plan requires benefit claims to be submitted within 365 days of treatment. Assuming the claim was incurred July 31, 2020, the individual has a 12-month outbreak period that ends July 31, 2021. Thus, the benefit claim must be submitted by July 31, 2022 to be considered timely.

Claims Appeal Deadlines

Group health plans must allow individuals 180 days to appeal an adverse benefit claim determination. The claims appeal deadline will disregard the Outbreak Period.

For example, an employee receives notice of adverse benefit determination on June 28, 2020. Assuming the individual’s 12-month outbreak period ends June 28, 2021, the appeal must be submitted by December 25, 2021.

External Review Request Deadlines

Individuals have four months after the date of receipt of an adverse benefit determination or final adverse benefit determination to request external review if the claim involves a medical judgment or rescission of coverage. The external review deadline will disregard the Outbreak Period.

For example, employee receives an adverse benefit determination on April 1, 2020. The employee will have until four months from the end of the individual’s outbreak period (by August 1, 2021) to file for the external review.

It’s important for you to remember that while employees have this additional time to elect coverage, they still must pay for the coverage retroactively – back to the date of the event. Therefore, while the extended timeframe seems daunting, most employers we’ve heard from have not had employees use outbreak period elections due to the costs associated with that retroactive coverage.

The First Person compliance team will continue to monitor this guidance and update you with any changes. If you have any questions, feel free to reach out to me, Katy Stowers or another member of our advisory team.