Mass layoffs and ending emergency declarations bring COBRA compliance to the forefront

The intersection of compliance rules, regulations, and laws often feels like driving a tractor-trailer on a superhighway during rush hour. HR and benefits compliance professionals have spent the last three years working through myriad administrative challenges during the pandemic. The President’s announcement of the plan to end the COVID-19 national emergency and public health emergency (PHE) on May 11, 2023, will require the undoing of extended timelines, required coverage, and emergency use authorized treatments, all while mass layoffs are trending. Administering COBRA continuation of coverage is about to get very complicated again.

The COVID-19 national emergency and the PHE declared in 2020 are two separate emergency declarations. One by the President and the other by the Department of Health and Human Services (HHS). In year three, an end date is planned that requires significant compliance preparation.

While the PHE is still active, provisions in pandemic-related legislation remain in a holding pattern. Legislation passed during the pandemic was designed to help alleviate costs associated with COVID-19 tests and testing-related services, including over-the-counter tests, with no cost sharing. It also included pre-deductible telehealth coverage in high deductible health plans and the ability to provide stand-alone telehealth plans for employees not eligible for their employer’s medical plan. Extensions of pre-deductible telehealth coverage through the Consolidated Appropriations Act already presented a gap for non-calendar year plans from January 1, 2023, until an employer’s 2023 plan renewal.

Planning for compliance obligations when the PHE ends will require a review of legislation passed between 2020 and 2023 to determine which coverages and provisions will revert to pre-pandemic standards or have already been untied from the emergency’s status. Additional legislation could arise, and each state’s department of insurance may have a say in whether any particular coverage will end immediately or at the end of the current plan year.

The national emergency declared by the President allowed for certain COBRA coverage continuation deadlines to extend to the earlier of one year from the date the deadline would have begun or 60 days after the end of the national emergency. The deadline extensions for COBRA continuation have presented an almost three-year administration challenge for employers and an ongoing need for clarification.

An individual experiencing a COBRA-qualifying event traditionally has 60 days to decide whether to elect COBRA continuation of coverage and then 45 days after that to make their initial premium payment. COBRA continuation can have no lapse in coverage, requiring premium payments for every month from the date the active employee coverage ended to when COBRA coverage began. However, COBRA deadlines were given tolling relief from the Department of Labor and Treasury, which extended the traditional deadlines for up to one year from the original due date or 60 days after the end of the emergency. Previous guidance clarified that tolling relief for COBRA election and initial pay do not run consecutively. For example, if a beneficiary elected COBRA coverage within the traditional 60-day window, their initial premium payment is due one year and 45 days later.

Employers that took advantage of the tolling relief for providing employees with their initial notice of COBRA rights will need to get back in the practice of sending this notice in the required timeframe and catch up on any notices that haven’t be sent or risk being subject to penalties. The challenge for employers and administrators will be reviewing each COBRA beneficiary’s standing within their individual tolling relief period.

On top of the pre- and post-pandemic COBRA administration challenges, the news is inundated with headlines of mass layoffs from big corporations in the tens of thousands. No employer is exempt from the possibility of downsizing due to economic conditions or other factors. Layoffs of employees enrolled in benefits require covered employers to provide COBRA continuation notices. One best practice is to review all COBRA-qualifying events from July 2022 through current to outline tolling dates. If the national emergency ends on May 11, 2023, administering COBRA will return to normal. Many COBRA beneficiaries’ 60-day time clock to elect coverage will begin, not end, on July 10, 2023. The challenge will be determining which part of each beneficiary’s COBRA process is due based on the earlier of the one-year tolling or 60 days after the end of the national emergency.

Related: Effective COBRA communications: Lessons learned from COVID

The ending of the emergencies is certainly a tangled web to unravel. The President is expected to renew the national emergency by March 1, 2023, and HHS will extend the PHE another 90 days in April to accommodate the planned termination effective May 11, 2023. Employers may have a variety of required notices to update and provide to employees. COBRA notices will need to be updated to remove any COVID-19 notations, and possibly amended and reissued to beneficiaries still in their tolling period. Summary Plan Descriptions may need to be amended, or a Summary of Material Reduction in Coverage notice prepared when coverage is removed. HR and compliance professionals will be waiting on pins and needles for further guidance over the next few months.

Angela Surra, CIC, CISR, SHRM-CP, Principal Benefits Expert at Mineral