The 4 Cs - Changing Carriers (and Vendors), COBRA & COVID-19

    employee benefits, cobraAs annual open enrollment time swiftly approaches, we wanted to take some time to note some of the COBRA considerations to be aware in the midst of the COVID-19 pandemic, particularly as it pertains to changing carriers/vendors during this turbulent time.

    The federal government issued guidance regarding COBRA election periods and HIPAA Special Enrollment Rights due to the pandemic, significantly extending the opportunities to enroll as a result of any eligible occurrences within those categories. 

    For employers changing vendors as part of their renewal this year, the new vendor will need to be provided with the following data:

    • Historical elections;
    • Enrollment data; and
    • Payment data

    This information should encompass all of 2020 at least.

    Employers changing vendors should also be cognizant of any potential COBRA qualified beneficiaries who still have the ability to elect and pay for COBRA coverage due to the various expanded Outbreak Period scenarios. There may also be individuals who previously elected COBRA coverage but have now ceased premium payments. Any new vendors should be aware of situations such as these so they will in turn know what date payments have been made through for administrative purposes.

    Some examples of what an employer should look out for when changing vendors this year are as follows:

    • Michael Jordan became COBRA eligible on July 1, 2020. The Chicago Bulls used COBRA Administrator #1 at the time of Michael’s initial eligibility but make an internal decision to move on to COBRA Administrator #2 at their renewal effective October 1, 2020. COBRA Administrator #1 provided Michael with a timely COBRA election notice but Michael has been busy focusing on baseball this year and has yet to make a COBRA election. In this scenario, it must be made clear to COBRA Administrator #2 that Michael (and other similarly situated individuals involved with the Bulls organization) will still have the option to elect COBRA retroactively back to July 1, 2020.
    • Michael Jordan elected COBRA coverage pre-pandemic and had been keeping up with his premiums without fail but decided that he no longer wanted to make any more payments at this time after paying up in full through the month of August 2020. As a result of the Outbreak Period guidance, now that COBRA Administrator #2 has come onboard they should be made aware that Michael’s COBRA coverage will have to reinstated back to September 1, 2020 if he trues up the payments that he missed post-August 2020. As per the guidance, Michael will have time after the conclusion of the Outbreak Period to issue his re-election and catch up on any outstanding payments.

    Other considerations are present for employers changing medical carriers this year as well. Old carriers will need to have the capability to accept retroactive enrollments related to the Outbreak Period incurred while that particular carrier was still responsible for the coverage. Similarly, new carriers should be ready and able to accept any delayed payments that resulted from the Outbreak Period.

    Let’s explore some examples of this from the standpoint of an employer changing medical carriers from Medical Carrier #1 to Medical Carrier #2 at their October 1, 2020 renewal effective date:

    • Cam Newton became COBRA eligible on July 1, 2020 after a long tenure with the Carolina Panthers came to an abrupt end. Although COBRA eligible currently, Cam has decided to wait to make an affirmative election until he gathers more information regarding the end of the Outbreak Period. His plan at the moment is to assess his medical needs from his July eligibility date through the month of September and elect to pay for COBRA retroactive to July 1, 2020 in October.
      • In this situation, Medical Carrier #1 will be tasked with reinstating Cam’s coverage for the months of July-September and Medical Carrier #2 will then need to add Cam onto their coverage effective in October.
    • In this second scenario, Cam Newton became COBRA eligible effective February 1, 2020 and made timely premium payments for the months of February-June of 2020 but has since ceased making additional payments. If the Outbreak Period officially ends on December 31, 2020, Cam will now have an opportunity to make retroactive payments to cover the months of July-December if he so chooses.
      • Medical Carrier #1 will be responsible for reinstating Cam’s coverage for July-September and Medical Carrier #2 will pick up Cam’s coverage starting in October.
    • An additional item of note: If COBRA vendors and medical carriers are being changed simultaneously this will present an additional wrinkle, as the employer will need to assist in making a determination on how to allot premium payments for coverage prior to the effective date (whether they will go to the old or new vendor).

    As mentioned above, the Outbreak Period will have an effect on HIPAA Special Enrollment Rights (SERs) as well, particularly as it pertains to marriage, the birth or adoption of a child, or loss of other group coverage. Rights impacting marriage or Medicaid/Medicare eligibility have an impact on coverage moving forward but the birth or adoption of a child will necessitate retroactive coverage.

    Some examples to be aware of from a HIPAA SER perspective are as follows:

    • On May 4, 2020, Jim and Pam Halpert have baby Michael but don’t enroll their newborn child onto their employer-sponsored plan until November 1, 2020 for whatever reason. Assuming that their employer Dunder Mifflin changed from Medical Carrier #1 to Medical Carrier #2 effective with their October 1, 2020 renewal date, Medical Carrier #1 would need to stand ready to add the newborn child retroactive to May 4, 2020 (the date of birth) and cover the timeframe until September 30, 2020 (the last day of Carrier #1’s coverage period).
      • Medical Carrier #2 would then need to add the child to their coverage beginning October 1, 2020 and any retroactive premiums for the child (doctor’s visits, immunizations, etc.) will need to be paid by the Halperts.
    • Same scenario here essentially but what if baby Michael was Jim and Pam’s first child and they would be changing from two-person coverage to family coverage?
      • Their employer would still have to charge retroactive contributions back to the date of birth.
      • Fun fact: the IRS allows retroactive pre-tax contributions for newborns, whereas adding a new spouse would require post-tax contributions (for the retroactive period) and pre-tax contributions for the prospective period.

    For more information on employee benefits, visit AssuredPartners Employee Benefits.


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