COBRA Continuation During the Health Crisis: FAQ by BASIC

Due to the current COVID-19 Pandemic that continues to impact businesses, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020 to provide some assistance to employers and employees being directly affected.

We understand that during this time of uncertainty, employers across the nation have been forced to reduce their workforce and have many questions regarding the impact of COVID-19 on COBRA compliance. While we are hopeful that the federal government provides relief impacting COBRA in terms of administration and premium assistance, to date, there have been no legislative changes impacting COBRA. We are closely monitoring legislation and guidance as it is released so that we can keep our clients and participants informed of any changes. We have prepared this FAQ to help with some of the questions that we have been seeing in regards to COBRA continuation during this crisis.

Q: Are there any changes to COBRA continuation in the new CARES Act?

A: At this time, there have been no changes to the regulations for COBRA (including subsidizing premiums, extending coverage periods or extending election or payment grace periods). If a current COBRA participant loses coverage because of failure to make timely payments due to circumstances surrounding COVID-19, they may be able to file an appeal for review by the employer to determine if they will be eligible for reinstatement once payments have been made current.

Q: What distinguishes a furlough from a layoff?

A: The primary difference between a furlough and a layoff is its impact on the employment relationship. During a furlough, active employment status is maintained and the employee has a reasonable expectation to return to work. As a result, unpaid furloughs are typically treated the same as an unpaid leave of absence. In contrast, layoffs typically mean employment and benefits are terminated, resulting in a COBRA event where the employee is not guaranteed rehire.

Q: Are employers mandated to extend COBRA grace periods?

A: Not at this time. Currently there are no changes to the COBRA regulations regarding grace periods for elections or payments. An employer may allow a COBRA participant additional time to elect or make a payment. However, due to restrictions with the carriers, not all plans may be able to make this exception, and if an extension is allowed for one employee, it should be provided to all employees. It is the responsibility of the employer to confirm with the carriers if they will allow extensions before approving them.

Q: Can participants make partial payments?

A: The recent legal changes have not included changes to the COBRA regulations regarding collection of premium payments within the allotted grace period. However, an employer may allow COBRA participants additional time to make a payment-in-full, which would be an extension of the grace period. The employer will need to notify BASIC of an intended change to the administration of grace periods. Due to restrictions with the carriers, not all plans may be able to make this exception. It is the responsibility of the employer to confirm with the carriers if they will allow extensions before approving them. If an extension is approved, the employer must acknowledge in writing to BASIC that they will not hold BASIC liable for short payments that are not collected from participants and cannot be recouped from the carriers as a result of these extensions. Please contact a BASIC representative for additional information.

Q: Can a participant that has missed their election or payment grace period file an appeal?

A: Yes. A participant is allowed to file an appeal to the Plan Administrator (employer) to request reinstatement. BASIC requires all appeals in writing from the participant, which will then be passed along to the employer for approval or denial. Once a decision has been made, BASIC will notify the participant and process any late elections or payments as approved. It is the responsibility of the employer to confirm with the carriers if they will allow an appeal before approving them.

Q: Can a participant extend their federal COBRA continuation period?

A: Not at this time. There have been no changes in the regulations to allow for additional coverage periods outside of the standard Federal COBRA guidelines. Participants may have other health coverage available to them, including coverage through the Health Insurance Marketplace at www.HealthCare.gov or by calling 1-800-318-2596.

Q: What is the COBRA obligation for an employer that is going out of business?

A: Unfortunately, if an employer is going out of business and health plans will cease to exist, there is no obligation to offer COBRA to employees losing coverage. At this time, we recommend that any employees losing coverage due to a permanent closure refer to the Health Insurance Marketplace at www.HealthCare.gov or call 1-800-318-2596 to find a plan that works for them.

If you’re a current BASIC COBRA client, please don’t hesitate to reach out to your BASIC Customer Service Team if you have further questions or require assistance. 

If you’re not a current BASIC COBRA client, and would like to learn more about BASIC’s COBRA administration, please click here!