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Keeping you informed about the rapidly changing ACA environment and how it’s affected by COVID-19

We know that workplace challenges often create the greatest stress on HR teams who are working diligently to keep their workforce healthy and safe. That's why we are committed to sharing what we know around regulatory changes and their bearing on health reform, insurance eligibility, payroll and more.

To keep you in the know, here's our Ask the Expert question of the week: 

Q. What are the penalty implications for the new COBRA extension to employers?

A. First let's cover what is new: Under the COBRA provision extension an individual who is laid off during the Outbreak Period has 60 days until after the end of the Outbreak Period to elect COBRA coverage. What this means is that someone who lost group health plan coverage at the end of March 2020 would have 60 days after the end of the Outbreak period to make their COBRA election and another 45 days to make their first COBRA premium payment.

A COBRA qualifying event that opens employers up to potential penalties is reduction in hours. If an eligible employee measures as full-time status in the prior stability period and has a reduction in hours during the measurement period, then the employer should continue to offer the employee benefits coverage (or risk penalty) during the stability period. If the employer keeps the employees on regular benefits coverage to avoid risk of B penalties, then the COBRA rules would not apply. If the employer instead terminates regular benefits and offers COBRA, they risk B penalties and the rules apply.

When an employee doesn't measure full-time according to the ACA during their prior measurement period, the employer is not required to make an offer. However, if the employer’s plan rules provide for an opportunity for these part-time employees to enroll in coverage and the individual does in fact enroll and then drops below the employer’s coverage rule requirements due to a reduction in hours for example, these employee may be eligible for COBRA continuation of their plan and the rules apply.

Employees who are terminated generally have 60 days to choose COBRA continuation coverage and then have 45 days to make a premium payment. Under the National Emergency Response Outbreak period, these deadlines would be extended (up to 60 days after the end of the national emergency), meaning laid off employees could have a long window during which they could ultimately elect COBRA continuation coverage and additional time for employees to make premium payments before an employer may cancel their coverage due to lack of timely payment (30 days after the end of the National Emergency Response Outbreak period).   

This means that employers have to keep this enrollment window open longer and may have situations where they have employees or former employees who they must keep enrolled in COBRA coverage, even though they have failed to make payments.

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