Terminating COBRA Coverage During the COVID-19 Outbreak Period

November 19, 2020

COBRA administration is complex, and never more so than with the passage of temporary changes due to the COVID-19 pandemic. On April 28, 2020, the DOL and IRS issued regulations extending deadlines for individuals to request midyear enrollments, exercise COBRA rights, pay COBRA premiums, and submit claims and appeals. This legislation introduced the term “Outbreak Period” which is a 60-day window, following the end of the President’s declared National Emergency, to make decisions regarding COBRA deadlines.

Many employers have struggled with the practical problems created by the various timeframe extensions due to COVID-19. A common question we are hearing is, “When can employers terminate COBRA coverage during the Outbreak Period?”

Without clear guidance, the best approach is to look at how the employer treats COBRA beneficiaries during the non-pandemic election period, and during the late payment grace period. Participants and qualified beneficiaries usually have a 60-day window from the date of the COBRA-qualifying event in which to elect COBRA, and then a 45-day timeline to make the first payment back to the date of the qualifying event. Once COBRA coverage begins, there is a 30-day grace period for late payments.

The question employers should asking themselves is, “How would I normally (in a non-pandemic time) treat those individuals from the date of the qualifying event until the first payment is received?” A similar question is “How would I normally (in a non-pandemic time) treat individuals who are in the [normal] 30-day grace period for payments?”

Employers can take one of two approaches:

  1. Terminate coverage on the date of the qualifying event or due date for that month’s coverage, and then if payment is received, retroactively reinstate that coverage; or
  2. Continue coverage until the end of the up-to-105-day (60+45) window or the 30-day payment grace period. If payment isn’t received by then, retroactively cancel coverage back to the date of the qualifying event (initial payment) or the due date of that month’s payment (grace period).

Chard Snyder will continue to process COBRA qualified beneficiaries through the Outbreak Period as normal, with the exception that we will accept election and payments within the allowed extension windows. Coverage will not expire until 30 days after the beneficiary has failed to make payment and can be reinstated back to the point of termination once payments are received. The plan administrator, or Chard Snyder as your designated administrator, would inform the insurance provider exactly what the status of coverage is for the individual seeking care if the election and payment is made timely after the end of the Outbreak Period, or at the end of the grace period.

In summary, with a lack of guidance from the DOL and IRS regarding a qualified beneficiary’s COBRA coverage status during the Outbreak Period, it appears that both options 1 and 2 above are permissible.  But it makes sense for a plan to treat a qualified beneficiary’s COBRA coverage status during the election period and payment period—which are lengthened by the Outbreak Period—using the same method as the plan treats a qualified beneficiary’s COBRA coverage status during the election and payment periods absent the Outbreak Period.  Whatever option a plan may choose, it must make sure that a qualified beneficiary’s COBRA coverage status during the election and payment periods is clearly communicated to any healthcare provider that inquires.  We also recommend that this information be communicated to qualified beneficiaries.