Attention, HR teams; there’s another change on the books.
COBRA, the federal Consolidated Omnibus Budget Reconciliation Act of 1985, is the ruling that allows employees who lose their job to continue their health insurance coverage. With more than 40 million Americans filing for unemployment by May 2020, the chances of experiencing a health insurance crisis are high. Many of these people used the COBRA rule to keep insurance even though they lost their job.
But new rules issued during COVID-19 extended the time limitation for when former employees could elect to use COBRA. What do the rules say, how does it change the laws, and how can employers handle COBRA notifications for their workforce?
How Did COBRA Change?
COBRA is a federal mandate for private companies with 20 or more workers and a group health plan to provide temporary continuation of that coverage after a qualifying event, such as loss of their job, divorce, or a reduction in the hours worked. This coverage is for qualified beneficiaries such as the covered employee, their spouse, or dependent children.
This recent change affected beneficiary eligibility, and the COBRA notices that former employees receive from their employer after they are removed from the payroll.
Normally, COBRA required several steps to enroll:
- Employers had 30-days after a qualifying event (layoff, reduction in hours) to notify the plan administrator.
- Employees had 60-days after a qualifying event (divorce, separation, or a child losing dependent status) to notify the plan administrator.
- The plan administrator then had 14-days to provide the beneficiary with the COBRA election notice form.
- COBRA beneficiaries had 60-days to continue their coverage from the date they received their COBRA election notice from the plan administrator.
- The beneficiary had another 45-days before the COBRA premium payment was required (with a 30-day grace period for each payment thereafter).
This new COBRA ruling allows former workers to select COBRA’s continued coverage at any time during what the government calls the “Outbreak Period” during COBRA. The Outbreak Period runs from March 1, 2020, to 60-days past the end of the COVID-19 national emergency—whenever that is.
There is the complexity inherent in communicating these new rules to qualified beneficiaries, because the extension, while a good thing overall, is open-ended. Another complexity is that some states have issued extensions on premium payment grace periods that extended beyond the federal mandate.
Failing to follow these complex and varying rules, means that your company is at risk for unwanted litigation. Law firm David Wright Tremaine, LLP, reports, “Recently, there have been a number of class-action lawsuits brought against employers claiming COBRA notices were deficient in one or more respects.” Lawsuits can stem from even minor mistakes, such as omission of the contact information or name of the plan administrator. This could cost your company up to $110 per day (with a maximum penalty of $40,150 annually) per beneficiary plus the costs of their legal fees.
Protect Yourself from Regulatory Change with an EOR
The pace of regulatory change in the complex world of HR is, even during normal times, fast-paced. The pandemic has added layers of complication to the barrage of local, state, and federal regulations affecting taxes, payroll, and other HR functions. If you’re worried about risk, you shouldn’t; there is an employee of record (EOR) standing by to keep you legal. FoxHire is a professional EOR firm with a strong tax record of handling everything related to the employer/employee relationship. Talk with our team. We can streamline your efficiencies and lessen your risk.