Along with the many stimulus provisions provided for in the Coronavirus Aid, Relief and Economic Security Act (CARES Act), the legislation also addressed many healthcare needs for Americans. The bill, signed on March 27, 2020, broadened the list of eligible healthcare expenses, expanded telehealth coverages for high deductible plans, and more. Nearly a month later, as companies and millions of workers are looking at continuing coverage, people want to know if COBRA benefits will also be expanded. Learn more below.
ARRA and COBRA Subsidies
In 2009, when the U.S. economy sunk into a recession, Congress passed the American Recovery and Reinvestment Act (ARRA). ARRA provided $24 billion to subsidize 65 percent of COBRA premiums for workers who were involuntarily separated between September 1, 2008 and May 31, 2010. Eligible workers were able to pay 35 percent of their COBRA continuation premiums for up to 15 months, whereas COBRA is usually 100 percent paid for by the employee.
ARRA presented many challenges to compliant COBRA administration. The subsidy was retroactive and it covered employees who had previously declined coverage; thus, COBRA administrators had to re-send notifications and adapt to numerous changes to their ordinary processes.
What could expanded COBRA benefits look like during the COVID-19 crisis?
Since March 15, 2020, nearly 22 million workers have filed for unemployment. Following the CARES Act, what could we expect to see with COBRA? Currently, the House of Representatives is working on a bill called “The Worker Health Coverage Protection Act,” which could have an impact similar to ARRA.
If approved, a federal subsidy may be more than 65 percent (possibly up to 100 percent, as proposed by the new bill) of COBRA premiums. That would mean that qualified employees could keep their coverage at a significantly reduced rate, and possibly even at no charge. This would alleviate many people from having to shop on the open market for healthcare coverage and give them peace of mind in the immediate future.
One thing to consider is that if a subsidy is enacted, it may be adjusted by income level (similar to the stimulus payments). Also, whereas the ARRA subsidy lasted for 15 months, a new subsidy could be shorter or longer.
Expanded Eligibility for COBRA Benefits
Part of the new proposal would expand COBRA benefits eligibility. Under current COBRA law, employees become eligible after experiencing an event that would cause a loss of coverage, such as job loss or a reduction in hours.
The new proposal would also cover furloughed employees. If approved, the subsidy would pay the employee’s portion of the premium since the employer is still covering its share.
Length of Coverage
COBRA law allows up to 18 months of continuing coverage. Under the new bill, however, qualified employees may be able to keep their coverage for a longer period; plus, start dates could reach back as far as March 1, 2020.
Challenges for COBRA Administrators
Third party administrators have been experiencing, and may feel overwhelmed by, a surge of COBRA communications. Having already sent a multitude of notifications, there may be a second wave coming. On Wednesday, April 29, 2020, the IRS and the Department of Labor published relief rules for COBRA filing.
COBRA Election Extensions During COVID-19*
According to the notice, employers “must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency or such other date announced by the Agencies in a future notice (the “Outbreak Period”) for all plan participants, beneficiaries, qualified beneficiaries, or claimants.” This rule applies to ERISA special enrollment periods, the 60-day election period for COBRA continuation, dates for making COBRA premium payments, dates for notifications of a qualifying event, and the date a plan sponsor or TPA has to provide a COBRA election notice.
Considerations for COBRA Administration
The first step in handling this COBRA influx is to review your fee structure. Is it based on PEPM or per unit of work? Will you need to amend your standard services agreement going forward based on the anticipated increase in work load?
Another consideration is your customer support staff. Do you have a phone tree or dedicated email address that enables you to trace COBRA contacts?
How about communications needs? Developing a standard email template for notifications that can be edited quickly could be very beneficial. You may also need to give your mailing service provider a heads up on the anticipated increase in volume.
Finally, how will you collect subsidized payments? Are your employer clients in the loop?
If you are a DataPath client, rest assured that we are attentively monitoring proposed COBRA changes and subsidies. When the time comes, our COBRA administration solutions will be ready to support these changes. Following the passage of ARRA, we helped our clients effectively tackle the myriad adjustments; that experience gives us the ability to quickly make the necessary updates for COBRA compliance.
Contact Your Elected Representatives
Millions of people are in need of affordable healthcare coverage as the economic impact takes its toll. As a third party administrator, the possibility of expanded COBRA benefits presents an emerging revenue opportunity for your firm. To support new COBRA legislation and subsidies, DataPath encourages you to contact your elected officials in Congress. Click here to search Congress.gov for your representatives.
*This blog was updated on 4/29/2020 to reflect the COBRA filing extensions published by the IRS and DOL.
DataPath, Inc. creates cloud-based COBRA software for third party benefits administrators.