Agencies Issue Guidance Extending Certain Employee Benefit Plan Deadlines

On March 13, 2020, President Trump issued a proclamation declaring that the coronavirus disease (COVID-19) outbreak in the United States constitutes a national emergency beginning March 1, 2020 (the National Emergency). Recently, the Departments of Labor and Treasury and the Internal Revenue Service (collectively, the Agencies) issued a final ruling that extends certain timeframes affecting participant and beneficiary rights under group health plans, disability plans, welfare plans, and other employee benefit plans covered by the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (the Code) during the National Emergency (the Joint Guidance).

Background

The Joint Guidance is intended to assist plan sponsors, administrators, and participants by broadly extending various plan deadlines (as described below) during the COVID-19 “Outbreak Period,” which began March 1, 2020, and will end 60 days after the National Emergency officially ends or such other date as the Agencies later provide. The Joint Guidance was issued on April 29, 2020, and is effective immediately.

Notably, the Joint Guidance includes several helpful examples that illustrate how the extended timeframes will work in practice. For purposes of these examples, the Joint Guidance assumes that the National Emergency will end on April 30, 2020, with the Outbreak Period ending 60 days later, on June 29, 2020. To the extent that different parts of the country experience different Outbreak Period end dates, the Agencies will issue additional guidance on how to apply the Joint Guidance.

HIPAA Special Enrollment Timeframes

General Rule: The Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires group health plans to provide special enrollment opportunities to employees and their dependents when (i) such individuals lose eligibility for other health plan coverage in which they were previously enrolled or (ii) an eligible employee acquires a dependent through birth, marriage, or adoption. Generally, these individuals are permitted to enroll in the plan if they are eligible for coverage and request enrollment within 30 days of the triggering event (or 60 days if the change in eligibility arises under the Children’s Health Insurance Program).

Extended Timeframe: Under the Joint Guidance, the Outbreak Period is disregarded for purposes of calculating the 30/60 days in which an eligible individual must exercise special enrollment rights.

Example: Under the Joint Guidance, an eligible employee who previously declined participation in her employer’s health plan and gave birth on March 31, 2020, has 30 days after the presumed Outbreak Period end date of June 29, 2020 (i.e., until July 29, 2020), to exercise her special enrollment rights and enroll herself and her child in the plan. Absent this special extension, the employee would have had only until the end of April (30 days after the March 31, 2020 date when she gave birth) to exercise special enrollment rights.

Winston Takeaway: Employers will need to work with their third-party administrators and insurance carriers to administer these new special enrollment rules during and after the Outbreak Period. Since relief applies to periods starting March 1, employers should review plan records to identify employees whose special enrollment requests were denied as untimely at any time starting March 1, 2020, to determine whether relief under the Joint Guidance applies. In addition, employers that have made other changes or exceptions to regular enrollment or eligibility rules in response to the COVID-19 outbreak should confirm that insurance and stop-loss carriers agree to honor any such changes.  

COBRA Timeframes

General Rule: Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), employees and their families who lose coverage under an employer-sponsored group health plan as a result of certain qualifying events (such as voluntary or involuntary job loss or a reduction in hours worked) may have the opportunity to continue coverage in the plan for a period of time, as provided by COBRA. Generally, an individual who experiences a qualifying event for COBRA purposes has (i) 60 days from the date of the qualifying event to elect COBRA continuation coverage and (ii) 45 days after electing coverage before payment of the initial COBRA premium is due. Subsequent premiums are to be made on a due date determined by the plan, and are considered to be paid timely if payment is made no later than 30 days after the date on which that payment is due.

Extended Timeframe: Under the Joint Guidance, the Outbreak Period is disregarded when calculating the COBRA deadlines, including the: 

• 30- or 60-day deadline for employers or individuals to notify the plan of a COBRA qualifying event;
• 60-day deadline for individuals to notify the plan of a determination of disability;
• 14-day deadline for plan administrators to furnish COBRA election notices;
• 60-day deadline for participants to elect COBRA; and
• 45-day deadline for which individuals must make a first premium payment and 30-day deadline for subsequent premium payments.

Examples: The Joint Guidance provides two specific examples that clarify the expanded timeframes for which qualifying individuals may elect COBRA coverage under an employer’s health plan and pay COBRA premiums, as described below:

• Electing COBRA coverage under an employer’s health plan: Under the Joint Guidance, an individual who experiences a qualifying event for COBRA purposes during the National Emergency has 60 days after the Outbreak Period, which currently ends on June 29, 2020 (e., until August 28, 2020), to elect COBRA coverage.
• Paying COBRA premiums: Under the Joint Guidance, an individual who was receiving COBRA continuation coverage on March 1, 2020, and failed to make monthly premium payments for March through June 2020 would have 30 days after the end of the Outbreak Period, which currently ends on June 29, 2020 (e., until July 29, 2020), to make timely premium payments for March, April, May, and June. Because the premium due dates are postponed and any payment for premiums would be retroactive to the initial COBRA election period, the individual’s insurer or plan cannot deny coverage and may now need to make retroactive payments for benefits and services received by the participant during this time.

The Joint Guidance also clarifies that if the individual described above makes a payment equal to two months of premiums by July 29, 2020, the individual would be entitled to COBRA continuation coverage for only March and April 2020. Further, the plan would not be obligated to cover benefits or services that occur after April 30, 2020.

Winston Takeaway: Providing additional time for individuals to both elect and pay for COBRA coverage will create many complications for COBRA service providers, insurers, third-party administrators and group health plan sponsors and may leave providers and/or plans in the difficult position of having to provide and pay for services while an individual’s status as a covered individual is uncertain. Under existing COBRA regulations, an employer has the option to either (i) continue coverage during the election or payment period, and then retroactively cancel the coverage if COBRA is not timely elected or premiums are not paid, or (ii) wait until a timely election and payment is made before coverage is retroactively reinstated under COBRA. The Joint Guidance implies that an employer may not have the option to cancel COBRA coverage due to a failure to make an election or to pay premiums until 60 days after the Outbreak Period ends. Many participating provider agreements provide for retroactive determinations of eligibility, but are usually limited to 60- or 90-day look-back periods. Plans that pay ineligible claims may not be able to recoup amounts. In addition, out-of-network providers do not have contractual arrangements with plans, so it is unclear how ineligible participant claims will be handled in the case of services received from out-of-network providers.

For qualified beneficiaries who lost coverage due to a termination of employment or reduction in hours and whose regular 18-month COBRA coverage period ends during the Outbreak Period, coverage may have to be reinstated if late notification of a second qualifying event or Social Security Administration disability determination is made within 60 days after the Outbreak Period ends. This type of retroactive reinstatement of coverage would also create administrative difficulties for group health plans.

While the extra time to elect and pay for COBRA is beneficial to employees and dependents during the COVID-19 crisis, this also creates incentives to take a “wait-and-see” approach before deciding whether to elect continuation coverage. The Joint Guidance makes it more likely that only qualified beneficiaries with high health care expenses will elect and pay for COBRA coverage, which will essentially drive up the health plan costs to the plan and the remaining plan participants. 

Claims Procedures Timeframes

General Rule: Under ERISA, the Code and the Public Health Security Act (PHSA), group health plans and health insurance issuers offering group or individual health insurance coverage are required to establish and maintain a procedure governing the filing and initial disposition of benefit claims, and to provide claimants with a reasonable opportunity to appeal an adverse benefit determination. Specifically, group health plans and disability plans must provide claimants at least 180 days following receipt of an adverse benefit determination to appeal (or 60 days in the case of other welfare benefit plans).

Extended Timeframe: Under the Joint Guidance, the Outbreak Period is disregarded for determining the period within which claimants may file a benefit claim under the plan’s claims procedure or appeal a denied claim.

Example: Under the Joint Guidance, a participant received a notification of an adverse benefit determination from a disability plan on January 28, 2020. The notification advised the participant that they had 180 days within which to file an appeal (which normally would have been July 27, 2020). When determining the 180-day period within which the appeal must be filed, the Outbreak Period is disregarded. Therefore, the participant’s last day to submit an appeal is November 24, 2020, rather than July 27, 2020.

Winston Takeaway: The Joint Guidance applies to both ERISA-governed claims and appeals deadlines and to plan deadlines established by the employer. Since the Outbreak Period began on March 1, 2020, and many flexible spending account plans have a March or mid-April deadline for submitting prior-year expenses for reimbursement, the Joint Guidance appears to require an extension until 60 days after the Outbreak Period ends. This could create significant administrative challenges for flexible spending accounts that allow carryovers or have a grace period.

External Review Process Timeframes

General Rule: The PHSA sets standards for external review for group health plans and health insurance issuers offering group or individual health insurance coverage, and provides for either a State or Federal external review process. Standards for external review processes and timeframes for submitting claims to an independent reviewer may vary depending on whether a plan uses a State or Federal external review process. For health plans or issuers that use the Federal external review process, the process must allow at least four months after the receipt of a notice of an adverse or final benefit determination for a request for an external review to be filed. If such request is not complete, the Federal external review process must provide for a notification that describes the information or material needed to make the request complete, and the health plan or issuer must allow a claimant time to perfect the request within the four-month filing period or within the 48-hour period following the receipt of the notification, whichever is later.

Extended Timeframe: Under the Joint Guidance, the Outbreak Period is disregarded for purposes of calculating the period within which claimants under the health plan: (i) may file a request for an external review after receipt of an adverse or final benefit determination, and (ii) may file information to perfect a request for external review upon a finding that the request was not complete.

Example: In accordance with the Joint Guidance, a participant in a group health plan receives a notice of an adverse benefit determination on April 15, 2020. Presuming the plan uses the Federal external review process and requires claimants to request an external appeal within four months of the participant’s receipt of notice, the participant would previously have had to file the claim by August 15, 2020. Disregarding the Outbreak Period, the participant now has up to four months following the current Outbreak Period end date of June 29, 2020, to submit a request for an external review (i.e., until October 29, 2020).

Winston Takeaway: Employers and insurers will need to stay up-to-date on further developments relating to the National Emergency as the Agencies continue to monitor the effects of the COVID-19 epidemic and potentially provide additional relief related to the epidemic. In particular, employers and insurers will need to monitor announcements regarding an official end date to the National Emergency, considering such end date will impact the calculation of the date that is 60 days following the Outbreak Period end date.

Lastly, it is possible different Outbreak Period end dates will be announced for different parts of the country. Thus, employers and insurers will also need to monitor any additional guidance regarding the application of these extended timeframes in their applicable locations. Complying with Outbreak Periods that will change, and may vary from state to state, will be extremely difficult for multi-jurisdictional employers and for employers with employees living and working in different states.

Please contact a member of the Winston & Strawn Employee Benefits and Executive Compensation Practice Group or your Winston relationship attorney for further information.

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