DOL Temporarily Extends COBRA Sign-Up Deadline
In response to the COVID-19 pandemic, the Department of Labor (DOL) has released a new rule allowing laid off or furloughed workers more time to sign up for health insurance continuation under COBRA, the Consolidated Omnibus Budget Reconciliation Act.
COBRA, which applies to group health insurance sponsored by businesses with 20 or more employees, typically gives workers losing job-based coverage 60 days to decide if they want to continue coverage. The new DOL guidance extends the timeframes affecting participants’ rights to coverage, portability, and continuation, as is the time to file a benefit claim or appeal denied claims.
The 60-day countdown clock does not start ticking until the end of the COVID-19 “outbreak period,” a date that is not yet known and could be months away. Depending on when an individual loses (or lost) his or her job in 2020, he or she has a minimum of 120 days to elect COBRA and possibly longer.
For example, if someone was laid off in April and the government determines the national emergency ends August 31, the “regular” 60-day COBRA election period would start on September 1 (and continue into October).
Continuing with this example, if coverage ended effective April 30 because of the layoff, the employee could wait until December to make a decision his or her COBRA decision – with coverage retroactive to May.
Details on the extension appear in the jointly published DOL and IRS document, Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak. The Society of Human Resource Management (SHRM) also offers useful information here.
While the new rule gives laid-off and furloughed workers a longer period to act on COBRA, there are risks for employees. They could be on the hook for thousands of dollars in back premium because workers have to pay both their portion of the premium for coverage – plus the share previously paid by their employer and a 2% administrative fee.
The DOL’s COVID-19 Frequently Asked Questions addresses other issues and provides additional guidance for employers, sponsors, and participants concerning the outbreak and COBRA.