FAQ: What are a plan’s options regarding COBRA continuation coverage during a qualified beneficiary’s election and initial premium grace period?

The COBRA regulations normally provide a qualified beneficiary with a minimum 60 day period to elect COBRA and a minimum 45 day grace period following such election to make the first premium payment.

However, under recent COVID-19 IRS/DOL joint guidance, the election and grace periods have been significantly extended. Specifically, in determining an election or payment deadline, the timeframe from March 1, 2020, to 60 days following the declared end of the COVID-19 National Emergency (which is not yet known) must be disregarded (or tolled). The COBRA administrator should communicate these extended timeframes to qualified beneficiaries (by providing, for example, a supplement provided with the election notice).

The IRS COBRA rules provide that during the interim election and premium grace periods, the plan could do one of the following:

  1. Provide the COBRA continuation coverage and retroactively cancel it if the election or payment is not timely made
  2. Cancel the coverage and retroactively reinstate it once the election or payment is timely made

The COBRA election notice should specify the plan’s chosen policy during the grace period.

In either situation, the plan would need to explain the status of the COBRA-qualified beneficiary to any health care provider seeking to confirm coverage during the interim period. So, if the plan’s policy was to provide the coverage and retroactively cancel it, the plan would need to inform a provider to alert them of the possibility of a retroactive termination that could result in claims not being covered. Some plans may continue to pay claims during this interim, but then retroactively deny the claims and seek reimbursement if a timely COBRA election and payment is not made.

Similarly, if the plan cancels but retroactively reinstates coverage, then the plan must inform the provider that the qualified beneficiary currently does not have coverage but will retroactively if the election or payment is made. During the interim period, some plans take the approach of denying claims, but later reprocessing these if a timely election and payment is received. Other plans may hold or “pend” the claims. However, given the current extended deadlines, pending claims may be particularly challenging if in-network provider contracts require payments within a certain timeframe.

For a fully insured plan, it is imperative that the employer consult with the carrier regarding the approach, as well as any third-party COBRA administrators. If the plan policy is to provide coverage and retroactively cancel it, the carrier may require the employer to pay the COBRA premium for the interim period. A self-insured plan should confer with the stop loss carrier and any other service providers. Given the additional administrative challenges presented by the extended deadlines, coordinated efforts and consistent, clear communications to qualified beneficiaries are essential.

Finally, an employer should consult with counsel regarding any liability concerns with respect to COBRA administration, including those relating to the extended election and payment deadlines.