COBRA Solutions, Inc.

2023 The End of the National Emergency due to COVID-19

On February 10, 2023, President Biden signed Doc. 2023-03218, that extended the ongoing national emergency concerning the COVID-19 pandemic to continue beyond March 1, 2023.  Within the same document, he stated that he anticipated terminating the national emergency on May 11, 2023. Then, on April 10, 2023, the President signed into law H.J. Res. 7, which terminated the national emergency effective immediately.

COBRA Solutions, Inc. has reviewed the law and has determined the procedures needed to get back to normal COBRA Administration. Please take the time to read and understand how this announcement will affect your COBRA administration.

What was changed by the National Emergency? 

Effective March 1, 2020, the Disaster Relief and Emergency Assistance Act implemented numerous changes to assist citizens and businesses during the pandemic. Specific to COBRA, it provided “extended” time frames for Plan Participants and Qualified Beneficiaries. These changes mandated that COBRA Administrators “disregard” the normal sixty-day election period and the forty-five/thirty-day standard premium payment grace period until sixty-days after the announced end of the National Emergency or what they called the “Outbreak Period.”

When the law was written, it was assumed that it would be a short-term assistance package.  However, after one year the national emergency was renewed (a national emergency expires after one year, if not renewed) and the Department of Labor released Notice 2021-01 which provided guidance for Plan Administrators and affected individuals. It limited the disregarded period for individuals to 1-year from the date that the individual was required to act or 60-days after the announced end of the national emergency.

When is the change effective?

The law stated that the standard election period and premium payment grace periods would begin sixty-days after the announced end of the National Emergency. Which makes the effective end date July 10, 2023 (or the described Outbreak Period).

What changes have been made to the COBRA Administration Manager due to the end of the national emergency?

After updating your software to version 23.5.x, you will see the following changes.

  • The notices will continue to show information on the extended election period until June 9, 2023; thereafter there will be no mention of the national emergency and its extended time frames.
  • COBRA-qualified beneficiaries who are sent a qualifying event notice between April 10, 2023, and June 9, 2023, will receive an additional election extension of no more than 60-days.
  • COBRA-qualified beneficiaries who previously experienced a qualifying event or whose qualifying event letter was sent after April 10, 2022 (one-year prior to the national emergency end date) will begin their normal 60-day election period on June 9, 2023, subsequently ending on August 8, 2023.
  • COBRA Participants will return to standard premium payment grace period (45-day initial or 30-day subsequent) on June 9, 2023 (60-days after the outbreak period).
  • The suspension of COBRA coverage and the associated notice will end on June 9, 2023.
  • An End of National Emergency letter has been added so that you may communicate with affected individuals of the end of the national emergency.
  • The COBRA reports have been updated to use the end of National Emergency date.

Do we need to notify COBRA Qualifiers and Participants of the end of the National Emergency?

Yes, we believe that you should. At this time, sending a letter to affected individuals is not required by law, but the Department of Labor has recommended that plans communicate the end of the National Emergency to impacted individuals in advance.

How do I update my software to the new version?

To perform an update to your software, start the COBRA Administration Manager software and under the File menu, select “Update Software via Internet” and then follow the provided instructions.

2021 COVID-19 COBRA Extensions Compliance Information

It has been one year since the relaxed COBRA timeframes became effective on March 1, 2020 and as we reach the 1 year anniversary we finally receive guidance from the Department of Labor in the form of a “Joint Notice.” The joint notice is a collective effort from the Department of Labor, the Department of the Treasury, and the Internal Revenue Service.

The joint notice reveals that the Outbreak relief period is expressly limited by statue to a period of one year and each qualified beneficiary will be treated on an individual bases and be allowed the 1 year timeframe extension or until the outbreak has ended.

Obviously this puts a huge burden on employers and COBRA administrators. Trying to track all these new timeframes is very difficult. This is where your software comes in to play. With version 21.3.x (available for download now), your software will do the following things.

  • Track 1 year anniversary dates for each QB
  • Terminate coverage for participants that have passed their 1 year anniversary (applicable COBRA timeframes still apply).
  • Return to normal 45-day and 30-day payment grace period for COBRA participants that have have passed their 1 year anniversary.

With all these new changes, we have a couple of examples that should help you understand the how the election and premium payment grace period extensions will end.

Example 1: Thomas has a COBRA qualifying event on September 30, 2020, but does not elect COBRA. Assuming the national emergency is not ended prior to September 30, 2021, Thomas will receive 60-days after his 1 year timeframe extension (November 20, 2021) to elect COBRA.

Example 2: Debbie has a qualifying on August 31, 2020, but does not elect COBRA. On May 31, 2021 the president ends the National Emergency. Debbie will receive 60-days after that and then another 60-days (normal COBRA timeframe) to make her COBRA election (or until September 28, 2021).

COVID-19 COBRA Timeframe Extensions

On March 13, 2020, President Trump issued the Proclamation on Declaring a National Emergency concerning the COVID-19 outbreak with an effective date of March 1, 2020. As a result of the National Emergency, participants and beneficiaries covered by group health plans (or other employee welfare benefit plans) may be encountering problems in exercising their health coverage portability and continuation coverage rights. For this reason, Federal government agencies have extended certain timeframes otherwise applicable to group health plans. Although the National Emergency changes numerous timeframes, this article will address how the law affects COBRA.

With many businesses closing down over the past couple of months, employees (and COBRA Participants) have many questions related to their employer-sponsored group health plan. What if my employer doesn’t pay the group insurance premium? If I am terminated, will COBRA be offered to me? I sent back my COBRA Election Form with premium, but I have not been reinstated – what should I do? The Third Party Administrator that collects my COBRA premium is closed and not forwarding the funds to my employer – will I be terminated? In these recent months, many individual’s health coverage was/is in jeopardy, so the government took action to slow down the process of terminating employees from a group health plan.

To make sure people did not inadvertently lose coverage, the government extended COBRA-related timeframes until the end of the “outbreak period.” The question is - when is the end of the outbreak period? At the time of this publication, that date had not been determined. The Federal Register states that COBRA related timeframes will be placed on hold until an “outbreak period End Date” has been announced. Once the End Date has been determined, they are providing a sixty (60) day processing period before the normal COBRA-mandated timeframes begin. For example purposes only, if the outbreak End Date is determined to be June 30, 2020, we can then calculate the COBRA-related timeframes. First, we add the 60-day processing period, establishing an August 29, 2020 “Determination Date.” From this Determination Date, we would begin tracking COBRA’s normal mandated timeframes.

COBRA Qualifiers with a qualifying event date between March 1, 2020 and August 29, 2020 (based upon the above example date) would be offered their 60-day election period beginning on the Determination Date to elect COBRA. Administrators would still notify the insurance carrier to terminate group coverage as of their qualifying event/loss of coverage date. If they elect COBRA, they would be reinstated back to the date coverage was lost and provided 45-days from August 29th (as in the above example) to make their initial COBRA premium payment. It is recommended that you do NOT reinstate these Qualifiers until an initial premium payment is made. COBRA Qualifiers may NOT elect their COBRA Start date; they will be retroactively reinstated to the date coverage is lost and responsible for all premium payments back to their COBRA start date.

Premium payments that are received will be applied to the first month that premiums are due. So, if a Participant is paid through April 30th and you receive a payment in August, those funds would be applied to May and following months in succession. The Participant is NOT allowed to tell you what months they wish the payment to apply.

During the outbreak period, if premium payment is not received, the Participant’s account should be suspended. Administrators should notify the carrier that the Participant had not made their standard payment and should be terminated/suspended at that time. The software will inform you in the Things-to-do box to send a COVID Suspension notice (instead of the usual termination for nonpayment notice). This will be the Administrator’s trigger to contact the insurance carrier(s) and inform them to terminate/suspend the Participant’s account. If payment is received within the 30-day (45 day initial) grace period (commencing on the Determination Date), payment will be applied beginning with the month after the paid through date. Claims will be paid for months with full premium payment.

For nonpaying COBRA Participants during the outbreak period, they will be informed by health providers and pharmacies that they do not have coverage. The suspension notice informs them to keep receipts for all covered benefits and submit a claim for reimbursement after premiums are paid. Participant will need to work with the insurance companies in receiving reimbursement for incurred claims during the extension.

Federal Government Release:
Federal Register -

Department of Labor -

New Department of Labor COBRA Letters

Recently, the Department of Labor release new revisions of the DOL General Notice and DOL Qualifying Event letter. Upon our initial review, we found mainly wording changes, not changing the expressed meaning of the notifications. It seems the new letters replaced more complex words with “more common” variations.

To receive these new letters, you will need to perform an update. The most common method for obtaining the update is to:

  1. Under the File menu, select the “Update Software via Internet” option. (If Microsoft Windows asks if you wish to start as “Administrator,” select “No.”);
  2. Click the Next button to access the files;
  3. You will be asked if you wish to review the new letters. You can select the desired letter and you will be shown the changes in red text.
  4. Click the Next button and you will be provided a button to select the letters you wish to update and the groups that will be updated. If you do not select the letters (which is not recommended), they will not be updated in your system.
  5. If you are a Third Party Administrator and make your own changes to the notice, you may want to just update one group. Upon completion, you can add/remove information as you wish and they save the document. Once saved, you may go under Notifications > Copy Letters to Other Groups. Select the altered letter(s) and the groups you wish to update and click the Copy Now button.

Upon completion, you will be given a Congratulations message and the COBRA software will restart.

If your firewall blocks you from obtaining the update through the software (as described above), you can directly download it by visiting

  1. Click on the “Updating Version 20 when you have a firewall;
  2. Follow the instruction on the web page;
  3. Under step #3, you will be asked to provide a password for the update.  The current password can be found in the emailed version of this newsletter (right column).
  4. Continue to follow the steps followed by entering the COBRA Administration Manager and replace the current letters with the new ones. (If you are a TPA, you may want to update just one group first, following step 5 above.)

When Administrating COBRA it is Best to Stick to the Guidelines

We frequently receive questions regarding whether or not to make exceptions to COBRA guidelines regarding late payments, late elections, etc. Being sensitive or compassionate to an individual’s situation is typically good practice; however, with COBRA it is best to stick to the guidelines. When you make exceptions to the COBRA rules you are setting a precedent – that means you will also need to apply it to all future instances. Following are a few examples where employers should give careful thought and consider sticking to the COBRA timeframes:

COBRA Premiums
COBRA has set time frames for the qualified beneficiary (QB) to make their COBRA premiums; there is a 45 day grace period for the 1st payment and then a 30 day grace period thereafter. If a QB requests that you accept a late payment, the employer should consider sticking to the rules and not allow for the additional time. The exception here would be an insignificant premium underpayment or incapacity (mental or physical incapacity that makes an individual unable to act or respond).

Secondary Qualifying Events
To be eligible for a secondary qualifying event (death, divorce or legal separation, loss of dependent status or Medicare entitlement) the qualified beneficiary has 60 days to notify the plan administrator of the secondary event. The 60 day clock does not start until the employer provides the notice for this event. If the QB notifies the employer outside of the 60 day time frame the employer should confirm that the notice was provided to the QB in a timely manner. If so, then it would be prudent to adhere to the 60-day timeframe.

This extension allows a qualified beneficiary to lengthen COBRA from 18 months to 29 months if the following requirements are met:

A Participant must have been disabled (prior to or) within 60 days of the COBRA start date. The Social Security Administration will make the determination as to the eligibility for Social Security benefits and notify the individual if they are considered disabled. The participant needs to provide a copy of this determination prior to you offering the 11 month extension.

During this disability extension period the employer can charge up to 150% of the COBRA premium. It is important for the employer to remain consistent and charge all qualified beneficiaries the 150 percent or the determined amount for the disability extension period.

Providing COBRA beyond 18 months
In some cases an employer might feel sorry for the situation a qualified beneficiary is in and want to extend the COBRA coverage over the 18 month time frame. COBRA has established timeframes for each event. For termination and reduced work hours COBRA provides 18 months of coverage. For other events like death of employee, divorce and loss of dependence status COBRA provides 36 months of coverage. Extending these timeframes is not in the employer’s best interest and may lead to establishing an unwanted precedent. Especially since the insurer may not allow it.

Late Elections
Qualified beneficiaries must be given at least 60 days for the election. This period is measured from the later of the coverage loss date or the date the COBRA election notice is provided by the employer or plan administrator. The important aspect of this is to view the postmark date on the election as the official date to use in these circumstances. Again, accepting an election notice past the 60 day election period is not good practice. You definitely do not want to set a precedent with the election period.

If an employer does decide to make an exception to the COBRA rules, they should consider the negative and positive consequences of the rule and determine how the decision would impact a precedent and the likelihood of the circumstances being repeated. The employer also must confirm with the insurer if making exceptions outside the COBRA rules to make sure they would be allowed. Lastly, make sure to communicate with everyone involved and document the reasons justifying the exception.

COBRA Training 101

As we enter a new year, we receive numerous phone calls regarding COBRA administration procedures. And with the addition of many new users, our staff feels it important to go through the basics of COBRA administration so everyone has a clear understanding as to "what needs to be done when" and your administration responsibilities. We know that this may be elementary for many of our seasoned professionals but we still recommend that you take the time to read through it.

• What is COBRA?
• What is a qualifying event?
• What are the required notifications?
• What about COBRA Premiums?
• What is a disability extension?
• What is a Multiple Qualifying Event?

Q: What is COBRA?
A: In July of 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act, commonly known by its acronym COBRA. In the 1980's (as with today), the population of uninsured Americans was growing at an alarming rate. Congress determined that many of these uninsured individuals have some relationship to an employer. Their thought was to create legislation that would allow employees and covered dependents the ability to temporally continue their group coverage for a reasonable amount of time when they experience a "qualifying event."

Q: What is a qualifying event?
A: There are two types of qualifying events; ones that affect employees and others that affect an employee's dependents. The two qualifying events that affect employees are (1) Termination of Employment (for reasons other than "gross misconduct") and (2) Reduction in Work Hours. To be considered a qualifying event, the employee must have a loss of coverage. (Example: If an employee has a reduction in work hours but is still eligible to continue under the group plans, there is no qualifying event.) Employees experiencing one of these events are eligible to continue coverage (for themselves and their covered dependents) for up to eighteen months under federal COBRA. (Some states such as California, New York, Connecticut and Texas have extended the maximum time frame.)

Dependents have their own qualifying events; Death of the Employee, Divorce or Legal Separation, Employee's Medicare Entitlement and Dependents that no longer meet the definition of a "Dependent" under the group insurance contract. Covered dependents that experience these qualifying events (in most cases) will experience a loss of coverage and should be offered the right to continue for up to thirty-six months.

Members losing coverage upon experiencing one of these events is classified as a "qualified beneficiary." Each qualified beneficiary has independent rights under COBRA. This means a spouse or dependent child may continue singularly on the group plan as if they were an employee of the company. They may only enroll on the plan(s) they were enrolled on the day prior to the qualifying event (unless they move from a specific service area and another plan is available). At Open Enrollment time, the qualified beneficiary has the same rights as "similarly-situated active employees" and may add/change plans, even add dependents. Dependents added during open enrollment do not receive the same rights as a qualified beneficiary but merely may continue coverage with the qualified beneficiary. In the software, we refer to qualified beneficiaries as "qualifiers."

Q: What are the required notifications?
A: COBRA requires employers (with twenty or more employees on at least half of the business days in the previous calendar year) to provide written notifications to inform employees and their covered dependents of their rights to continuation coverage. The law requires seven notices; the General Notice, Qualifying Event Notice, notice of Conversion rights under eligible group plans, Open Enrollment letter, Short Payment Letter, Unavailability of COBRA notice and a Termination letter when the qualified beneficiary terminates coverage prior to the end of his COBRA term. All notifications may be sent by USPS first class mail. (Administrators are not responsible to verify the qualified beneficiary receives the notice but merely prove it has been sent to the last known address.) The General Notice is designed to be sent to newly-hired employees as they enroll on one or more of the group plans. This notification explains COBRA and the steps necessary for notifying the Plan Administrator of a qualifying event. This notice should be sent to both the employee and covered spouse. Many insurance companies include the General Notice in their certificate of coverage but it is recommended a notice be sent via mail. COBRA requires the General Notice be sent within ninety days from the date coverage becomes effective. To produce this letter in the software, click File and Newly Hired (Active) Employee and enter the employee's information. Double click in the Things-to-Do box on the line that states "Send DOL General Notice to . . ." and the letter will be produced. Since all employees should have been provided this notification at some time; if you cannot prove they receive it you should send another and place a copy in their file. (Once printed, the letter will be saved in the employee’s digital File Cabinet.)

The COBRA Qualifying Event Letter is the notice sent when an employee/dependent experiences a qualifying event. This letter explains a qualified beneficiary’s COBRA rights as well as detailing the cost for coverage and the enrollment procedures. Anytime you remove someone from the insurance plan, you should examine if a qualifying event has occurred. If so, you need to send a Qualifying Event Letter. To produce the Qualifying Event Letter in the software, click the File Menu followed by the New COBRA Qualifier option. Enter the information on both the employee and covered dependents. (If the employee elected not to cover his/her dependents on any group plans, do not enter them into the system.) Once completed, the Things-to-Do list will state "Send DOL Qualifying Event Letter to . . .” Double click on that line in the list and the letter will be produced, importing the information specific to the qualified beneficiary. This notice must be sent within forty-four days of the later of the qualifying event date or the date coverage is lost. (Employers using a Third Party Administrator must provide notice within thirty days to the TPA and then the TPA has fourteen days to produce and send the letter.)

The Conversion Notification explains a qualified beneficiary's right when they lose coverage at the end of their COBRA term. Not all plans offer a conversion right and the appropriate box should be checked under the insurance plan information screen. If your plan offers a conversion privilege, the system will track a COBRA Participant's coverage and 180 days prior to the end of their COBRA time frame, a line in the Things-to-do box will advise you to send this notification. A conversion policy is an individual plan whereby the employee/dependent does not have to qualify (by medical underwriting) for coverage. Usually, conversion policies are age-rated and have higher rates than standard individual plans. We have seen a trend of insurers to eliminate conversion plans after the passage of the Affordable Care Act which provides plans with no pre-existing condition limitations.

As insurance plans renew, they have different monthly premiums. Plan Administrators are required to notify Participants of the new rates and their rights during Open Enrollment. Participants should be granted the same rights as “similarly-situated” active employees. Therefore, if active employees are allowed to change, add or terminate plans, Participants should be allowed the same rights. During Open Enrollment, most plans offer the ability to add/remove dependents. COBRA Participants should be offered this right as well but any added dependents added do not receive the rights of qualified beneficiary. To produce Open Enrollment letters in the software, click the “Produce Open Enrollment Letters” under the Events Menu. Enter the renewal date, select the plans the Participants are eligible followed by selecting all the participants. Lastly, enter the date you need the Enrollment Forms from the Participants and click the Print button.

If a Participant sends a payment that is short by an “insignificant” amount, Plan Administrators are required to notify the Participant and make arrangements to make up the payment. The law defines a payment being “insignificantly” short if you receive a minimum of 90% of the monthly premium when the premium is less than $500. For monthly premiums over $500, if the payment is short by $50 or less than it is considered “insignificant.” Plan Administrators are allowed to accept the check as payment in full or send a notice detailing the short payment. The software will notify the user when a payment is short by an insignificant amount and places an item in the Things-to-do list to send the letter.

The Unavailability of COBRA notification is sent to former qualified beneficiaries who are not eligible to continue under COBRA. For example, a spouse contacts the Plan Administrator ninety days after his/her divorce of their desire to continue coverage. The law provides sixty days for the qualified beneficiary to notify the Plan Administrator; therefore the person did not meet the deadline and have become ineligible for continuation coverage. In the past, the individual would be under the assumption they had coverage (until they submitted a claim and it was denied). For this reason the Department of Labor (DOL) requires Plan Administrators to send a notification explaining they were not re-activated and they do not have coverage. To create this notification, select FILE/Other Unique Files/Individual Ineligible for COBRA/New File. Enter the individual’s information and save. The Things-to-do box will notify you to send the Unavailability of COBRA notice.

In the event you are removing a qualified beneficiary from the group plan (voluntarily or not) prior to the end of their COBRA time frame, the 2004 Final Regulations require you send a termination notice. The software has always produced these notifications and you will be prompted in the Things-to-do box after terminating their coverage. Produce the letter and send as soon as possible (because time frames will vary based upon the type of termination experienced). If the employer is terminating one or more group health plans without replacing them, COBRA Participant’s should be notified. Since the facts of this form of plan termination differ among employers, the system will NOT produce a template letter. Plan Administrators will be responsible for creating and distributing a notice.

COBRA Acceptance - The natural progression of events is Active employees and/or covered dependents become qualified beneficiaries who then become COBRA Participants (when they agree to pay for premiums for continuation coverage). As part of the COBRA Qualifying Event Letter, a Summary and Election Form is provided so the qualifier may notify the Plan Administrator of their desire to continue coverage. If you receive this form or are contacted directly, you should have them complete a COBRA application for the insurance carrier(s) and notify the software so it may set-up a billing account. Qualifiers have sixty days from the later of date they lose coverage or the date on the Qualifying Event Letter to notify you of their desire to accept COBRA.

Since COBRA coverage is continuation coverage, you must add them back onto the group plan with no lapse in coverage. It is recommended you do not reinstate coverage until you have received the first premium payment. This could mean going back a few months to retro-actively add them back onto the plan(s). There is one exception when you would not retro-actively enroll the qualifier and that is when the employee removes a dependent from the plan "in anticipation of a future qualifying event." The most common situation is when an employee removes a spouse and later they are divorced. In that situation, you would offer COBRA to the spouse effective on the date of the divorce.

The most important procedure with COBRA administration is to document or have a paper trail of all COBRA-related events. A 2006 court case demonstrated the importance of maintaining a copy of sent notifications (which the software stores in its digital file cabinet) as well as a log detailing all notifications sent, when they were placed in the mail and have the administrator initial it was mailed. The software has a Proof of Mailing Form that should be completed on a daily basis and maintained in a log book. Another form of proof is to scan the postmarked envelope and save the copy to the qualified beneficiary file cabinet.

Q: Are Participants required to pay monthly premiums?
A: Once a qualifier elects COBRA and becomes a participant, they are required to make payments to your organization. Premiums are based upon the group rates your firm is charged (plus a two percent administrative fee to help cover postage/administrative costs). The participant is required to make payments in a timely fashion. They have a forty-five day grace period to make their initial premium payment. Thereafter, they have a thirty-day grace period. If they do not pay within these time frames, you may terminate their coverage. The software tracks payments and notifies you when someone has not paid in a timely fashion. Once notified, you should prepare the termination notice and then terminate them from the plan effective the last day premiums were paid through. You will want to make sure you notify the insurance companies as soon as possible because most of them have implemented a maximum retro-termination policy, only allowing you to receive premium credits back sixty.

There will be times when participants will not pay you prior to the company submitting group premiums to the insurance carriers. If you have not received COBRA payments, it is recommended you do not pay the carrier for their premiums.

Q: What is a disability extension?
A: If a qualified beneficiary is disabled on a date that is earlier than the 61st day under COBRA and later considered “disabled” by Social Security Administration (SSA), the law provides for that individual and all others covered under the same policy to extend their coverage from eighteen to twenty-nine months. To receive the extension, qualified beneficiaries must provide the SSA determination to the Plan Administrator within 60 days of the notice’s date and prior to the end of the 18 month continuation period. This eleven month extension comes with a price. Employers may (or may not) charge a fifty percent administration fee during this extension. The software will make the necessary change to premiums, automatically.

Q: What is a Multiple Qualifying Event?
A: If an employee initially experiences a termination of employment or reduction in work hours and later a covered dependent experiences another (or “multiple”) qualifying event, the dependent should be offered the right to continue up to thirty-six months from the original COBRA start date. In the software, click the Events Menu followed by the Multiple Qualifying Event option. Enter the information on the qualifier and the system will create a new billing account for them and produce a letter explaining their rights. (If employment termination follows a reduction in work hours, the law does not consider it a multiple qualifying event; therefore the qualified beneficiary would only receive the eighteen months continuation coverage offered upon the reduction of work hours.)

This is a very brief summary of COBRA. The actual law is hundreds of pages and is very complex. We appreciate your confidence in our software and hope that we can continue to provide you with useful information to assist with maintaining your COBRA compliance. Our goal is to keep you informed about COBRA, proposed legislation and the operation of our software. If you have any recommendations as to content of these monthly newsletters or software enhancements, feel free to email us at

Correcting Failures when Offering COBRA

When a COBRA administrator discovers a failure to offer COBRA coverage they should take immediate steps to correct the mistake to avoid such penalties as ERISA ($110 per day), IRS excise tax and lawsuits.

Code Section 4980B imposes an excise tax on failures unless an employer has not received an audit letter from the IRS and the failure is due to reasonable cause, as opposed to willful neglect, and remedied within 30 days after any person liable for the tax is aware of the failure to comply with COBRA. A COBRA failure is considered corrected when retroactively undone to the degree that any affected beneficiary is restored to the same financial position as the beneficiary would have been had the failure not taken place. The code requires that the qualified beneficiary is offered the election of the most favorable coverage with regards to the medical expenses incurred after the failure occurred. In this case, the term beneficiary also implies reference to the qualified beneficiary’s estate.

Keep in mind the employer is liable for all expenses incurred by the employee due to the employer’s failure to comply with COBRA. This means that according to IRS’s COBRA Examination User’s Guide it may involve determining whether the complaining individual had been “made whole.”

Judicial standards as reported in past decisions in terms of assessing retroactive corrections of COBRA failures offer valuable insight as to what constitutes proper correction of COBRA failures. Generally the corrections involve providing:

  1. the benefits that should have been paid to a qualified beneficiary for already-incurred medical expenses, less applicable COBRA premiums;
  2. coverage for remaining portion of the maximum coverage period; and
  3.  attorneys’ fees and interest.

As for implementing measures to correct failures there are no simple solutions that will work in every situation. However, the following options appear to satisfy the Code’s requirements that qualified beneficiaries are to be restored to the position they would have been in if COBRA coverage had been properly offered: In the event that a plan administrator has failed to offer COBRA coverage the notice should be provided. In the event the notice was inadequate it should be provided again – one possibility is to provide the notice again with open enrollment materials. If the qualified beneficiary is within the election period and it is discovered that the election notice was not sent, then the plan administrator should re-send the notice. However, if it is outside the election period and there is solid proof that the notice was sent to the last known address, then the plan administrator may decide not to provide a second notice. In regards to a notice of unavailability or termination notice, even though these notices basically inform the qualified beneficiaries that they will not have coverage, a new one should be provided if missed. Providing a notice could stop the penalty period from running.

When retroactive COBRA coverage is necessary, offer to pay all covered claims that have been charged to date, or if earlier, the expiration of the applicable maximum coverage period whether it be 18,29, or 36 months from the qualifying event. Keep in mind, however, that each qualified beneficiary should be given the choice to elect the period of retroactive COBRA coverage. For example, if the employee wants to end coverage prior to the expiration of the full period, the employer cannot demand payment for the full retroactive period. Also, ensure that all beneficiaries are clearly notified that this offer is for retroactive coverage only as it can easily be assumed that they are being offered prospective coverage.

If the COBRA election notice is very late or the maximum coverage period has already expired, you may consider offering some sort of prospective coverage. While this offer would seem to go beyond what COBRA requires, it may mitigate complaints that necessary medical attention was passed up due to lack of proper coverage being offered; it can be argued that retroactive coverage does nothing to make up for lost health care treatment.

As for collecting the initial payment premium, there are conflicting arguments - be careful about demanding one lump sum. There has been at least one case where the qualified beneficiary was still allowed to make monthly payments while the employer was required to provide the full retroactive coverage. On the other hand, there have been at least two court cases to permit the request for a lump sum although neither case directly considered the question. The Ninth Circuit has upheld a decision that required payment for retroactive premiums to be collected in a lump sum (Chaganti v. Ceridian Benefits Servs., Inc., 2006 WI. 3431753 (9th Cir. 2006). But it should also be noted that the 1999 final IRS COBRA regulations provide that plans may permit qualified beneficiaries to make payments at other intervals such as weekly, monthly, quarterly and semi-annually so it could be easy to assume this requirement would also hold true in the case where a COBRA notice was late due to the failure of a plan administrator. In one court case, the employer’s demand for a lump sum payment was upheld, however large statutory penalties were awarded to the qualified beneficiary.

In the case of conversion coverage that might have been elected if not for the failure to offer, consider offering conversion coverage beginning with the expiration of COBRA coverage if permitted by insurance carrier. Also be careful not to limit claims filing deadlines for expenses incurred before the correction. And in the case of a qualified beneficiary becoming covered by another group health plan, according to one court case, it concluded that the plan should still offer COBRA coverage as a curative matter even if this means the opportunity for dual coverage. Until the plan administrator corrects the election notice failure, the fact that the qualified beneficiary has become covered under another plan, does not relieve the obligation to offer COBRA coverage.

In any event, it is probably not wise to use standard election notices and forms in the case of a correction, especially one that is very late. It would be best to customize written notices for the specific situation to avoid confusion and future litigation. Ultimately, if a qualified beneficiary refuses the appropriate offer for retroactive coverage they lose any claim for COBRA.
For those Insured or Self –Insured plans with Stop-loss Insurance the employer needs to work with the insurer to make sure they will provide the coverage that is being offered. Also, an employer that is held liable for violating COBRA, should investigate whether this could be covered under its liability policy, and the decision to correct the failure should be made in accordance with the liability policy’s notice provisions and guidance.

In the case of withdrawing offers of COBRA coverage the plan administrator should look at the strengths of their position based on a review of COBRA documents such as the election notice, the initial notice, the SPD, the plan document, the plan’s insurance contract and any other pertinent communication documents. Looking at past practices will also be critical as this alone can determine the obligations even when the law does not. And lastly, look at the facts. Were specific representations made to the claimant? Should the claimant have understood the coverage was mistakenly offered? Were there any misrepresentations by the claimant in order to gain coverage? It is advisable to seek counsel to make certain the legality of the decision to withdraw coverage retroactively is substantiated.

Gross Misconduct Can Void COBRA Rights

In the court case, Gilson v. Pennsylvania State Police, 2016 WL 1237351 (W.D. Pa., March 30, 2016), a federal district court in Pennsylvania ruled that the plaintiff, William Gilson, was appropriately denied the option of COBRA coverage due to his termination of employment for “gross misconduct.” Although the term “gross misconduct” is not clearly defined in COBRA statute, therefore being rather ambiguous to affirm, courts generally look to state unemployment law in making their determination of whether a termination occurred by actions that escalated to the level of “willful misconduct.” In this case, state trooper Gilson’s actions of sexual misconduct and deception were found to be just cause for the negation of his COBRA rights.

The facts of the case are as follows: As an employee of the Pennsylvania State Police (PSP) Gilson, along with several other officers, were called to an incident in August of 2009 where a female crisis service worker was also present. She alleged that Gilson touched her inappropriately, claiming he placed his arm around her waist and pulled her toward him. There was at least one other officer that corroborated this violation. Disciplinary and arbitration proceedings ensued which found that Gilson lied several times about the facts of his actions. Consequently, it was determined that Gilson had indeed violated the PSP’s regulations prohibiting police officers from engaging in sexual misconduct/harassment and was thereby given a notice of termination in November of 2010. After an arbitrator upheld PSP’s decision, Gilson was terminated on May, 2, 2011 and given no option of COBRA coverage by PSP because of his gross misconduct.

Gilson decided to sue PSP as well as several individuals, claiming his COBRA rights under the Public Health Service were violated. Because the COBRA statute does not contain an actual definition of what “gross misconduct” means, the court chose to take the lead from the standards set by the state in terms of unemployment compensation. So in this case, the court noted that under Pennsylvania law discharges resulting in willful misconduct connected with work disqualifies an individual from receiving unemployment benefits. It was therefore determined that for COBRA purposes, Gilson’s actions would also constitute “willful misconduct” thereby taking away his COBRA rights.
Gilson fought back. Ironically, in this case, he was actually awarded state unemployment compensation, therefore bringing into question whether his actions did comprise the willful misconduct standards. Gilson argued that the unemployment office determined that the August 2009 incident “was not sufficiently related in time” to the notice of termination in November 2010. Because of that, the unemployment office could not say for certain that his termination was caused by the PSP rule violation. However, the court noted that just because the unemployment office may have had a hard time with the timing issue, it did not rule out the fact that Gilson’s inappropriate physical contact and “serious act of deception” was deemed “gross misconduct.” Subsequently, the court ruled in favor of the defendants.

In this author’s opinion, employers should be very cautious when considering a gross misconduct decision. Because of the lack of a clear-cut definition in the COBRA statute, this a judgment call that should be well thought out and documented to avoid costly litigation. Remember laws vary from state to state. Not all legal verbiage in one jurisdiction can be applied across the board. Taking a good look at relevant cases in your locality may offer helpful guidelines.


The connection between COBRA and Family and Medical Leave Act (FMLA) can be confusing. Plan administrators need to understand that although going on leave under FMLA does not necessarily trigger a COBRA qualifying event, the failure of an employee to return to work after exhausting his FMLA leave could create a qualifying event if it causes a loss of coverage. An employer is not obliged to extend the benefits of FMLA even if the individual remains an employee during sick or short-term disability leave.

In a recent case a firefighter was not able to return to work after exhausting his FMLA leave although he remained an employee because of the sick leave hours he accumulated after years of employment. He filed a lawsuit against the City claiming the City violated COBRA when it cancelled his insurance benefits.
The case is Neal v. City of Danville, Virginia, 2014 WL 7011123 (W. D. Va. Dec. 11, 2014)

Barry Neal, a firefighter for the City of Danville, was injured on Feb. 1, 2013 in a non-work related accident. Neal used about 2,000 hours of paid sick leave that he had accumulated since he began working for the City of Danville in April 1987. Contrary to Neal’s choice, the city put Neal on FMLA on Feb. 15, 2013, although he remained covered under the City’s health plan as he continued to use his accrued sick leave hours.

The City sent Neal a COBRA election notice after he exhausted his 12 week FMLA and he was still unable to return to work. The City told him his health insurance benefits would be cancelled according to the City’s FMLA policy which states “in all cases, at the point of FMLA leave exhaustion, the employee’s benefits will be subject to COBRA and/or direct billing, as applicable, based upon the benefit.” Neal elected COBRA after he exhausted his FMLA leave and paid approximately $1,872 in COBRA premiums.

On July 17, 2013 Neal was medically cleared to return to work and the City reinstated his group health benefits. Neal then decided to sue the City stating that since no qualifying event occurred, the city violated COBRA when they cancelled his benefits. The City argued that a qualifying event did occur – they felt that Neal’s use of sick leave was a reduction in work hours that he actually worked, thereby creating a qualifying event and a loss of coverage.

The court stated the reduction in work hours applies in this case since COBRA states that a reduction in work hours occurs, “whenever there is a decrease in the hours that a covered employee actually works.” In Neal’s case, after he exhausted his FMLA leave, the number of hours he worked decreased to zero. Also the court stated that the City’s policy clearly states that an employee’s group health insurance benefits be terminated if the employee fails to return to work following 12 weeks of FMLA leave. The court decided that both of these facts support the City’s action in providing Neal with COBRA continuing coverage. The court stated that Neal’s claim that paid sick leave is equivalent to FMLA leave did not hold up, noting that COBRA regulations state that absence from work for any reason “other than due to leave that is FMLA leave” is a reduction in work hours. The court contended that FMLA regulations clearly provide that an employer is not obligated to extend the benefits of FMLA if it has a greater leave policy than mandated by the act. It was determined that the City was under no legal obligation to extend the benefits elemental to FMLA leave to Neal’s paid sick leave in excess of twelve weeks.

In this author’s opinion: This case shows that an employer is not obligated to extend FMLA leave benefits beyond twelve weeks even when an employee has accumulated paid sick leave. The fact that the employee remained on sick leave until returning to full time employment did not affect the result. It is important for employers to make sure their leave policies reflect the connection between COBRA and other extended coverage such as FMLA.

Issues with Insurance Carriers

The following questions are examples of difficult situations that often arise between major insurers and employers along with possible solutions for a positive outcome:

What if the Insurer is denying COBRA?
First of all, the employer should confirm that the COBRA election notice was sent within the proper time frame. Keep in mind the COBRA statute states, “the employer of an employee under a plan must notify the plan administrator of a Qualifying Event with 30 days of the Qualifying Event.” Furthermore, the statute also requires the plan administrator to notify any qualified beneficiary, with respect to an event, within 14 days of the date on which the employer notifies the plan administrator of the date.

In the event that the employer failed to send the election notice within the proper time frame then the insurer can deny COBRA coverage. This means the employer will become self-insured for any and all claims made during the full 18, 29, or 36 month COBBRA coverage period. If confirmation can be made that the election notice was sent in a timely manner and everything was done correctly then the following steps should be taken:

  1. Obtain the specific reason the insurer is denying coverage
  2. Provide documentation of your COBRA compliance along with applicable legal guidance. These can be found in either the notice regulations issued by the U.S. Department of Labor (DOL) in 2004, or the COBRA regulations issued by IRS in 1999 and 2001.
  3. Examine the COBRA language in the insurance contract and policy – specifically find the part that outlines what obligates the insurer to comply with COBRA.

What if the Insurer is denying an Extension of Coverage?
The first thing to do is make sure the qualified beneficiary was properly notified of their 60-day responsibility to notify the plan of a secondary event. The notice must include who should be notified and in what manner. Remember that until a qualified beneficiary has been notified the “clock does not start ticking.”
In order to ensure the extension will be accepted, the employer should first obtain the specific reason for the denial from the employer and then:

  1. Submit documentation proving the proper time frame was met
  2. Submit documentation received from the qualified beneficiary
  3. Provide the DOL’s 2004 final regulations.

In summary, timing is of the utmost importance when dealing with COBRA. In this author’s opinion employers must work in conjunction with insurance carriers to ensure all rules and regulations are followed. Otherwise, the employer will run the risk of becoming self-insured which could be potentially devastating financially.

How does COBRA and Medicare Interact?

COBRA Solutions has been answering questions regarding COBRA since 1991 and we are often asked, “What is the most common question regarding COBRA?” It is actually a very easy question to answer; how Medicare and COBRA interact. This COBRAinReview will discuss COBRA and Medicare and how to administer COBRA correctly.

There are six situations where COBRA and Medicare interact and have been interpreted completely different throughout COBRA’s existence. Keep in mind; you cannot use logic when discussing COBRA and Medicare’s interaction. You also will have a difficult time finding confirming information on the internet. Quite frankly, there are many situations where administrative procedures don’t seem logical. Let’s examine those six COBRA and Medicare interactions.

  1. Employee’s Medicare Entitlement While Continuing to Work

    Not all employees retire at age 65. Many want to continue working but over the years the cost for group coverage has increased to the point many Medicare Entitled employees wish to drop their group coverage and obtain a Medicare Supplement Insurance plan. (And, due to MSP rules, employers may not terminate employee coverage because of Medicare Entitlement.) Although it was once considered a COBRA Qualifying Event for covered dependents, today’s interpretation is that the employee would be voluntarily cancelling his/her group insurance and therefore dependents should not be offered COBRA because coverage is not “involuntarily” lost.

    In a situation where an employee voluntarily removes him/herself from a plan, it is recommend to see if they have dependents on their plan. Prior to contacting the insurer to remove the employee, have a conversation to let them know their dependents will be terminated along with them and will not be offered COBRA. Some employers will have the employee sign a form stating he/she understands this consequence if they still wish to cancel coverage.

    In the COBRA software, you would enter this individual under File > Other Unique Files > Active Employee Voluntary Removal From Group Plan > New File. Enter the employee’s information and the system will place the Voluntary Removal Letter in the Things-to do list. Although not required by COBRA, it is recommended you send this notification so dependents know their coverage has been cancelled.

  2. Medicare as a Multiple Qualifying Event

    Once a COBRA Participant has started on COBRA and then becomes Entitled to Medicare, has a “multiple COBRA Qualifying Event” occurred? We know that Medicare Entitlement is a reason for COBRA termination but what about covered Qualified Beneficiaries? Prior to 2004, it was deemed as a qualifying event and covered dependents were offered up to thirty-six months of continuation coverage. But with Rev. Ruling 2004-22, 2004-10 I.R.B. 553, the Internal Revenue Service determined that a COBRA Participant’s Medicare Entitlement will rarely be considered a multiple qualifying event. They stated that under MSP (Medicare Secondary Payer) rules, group health plans are unable to terminate covered dependent’s coverage; therefore there they should not experience a loss of coverage.

    If a COBRA Participant becomes Entitled to Medicare, you will want to remove them from continuation coverage. Follow the steps below in the software to correctly remove them:

    a) Under the Events menu, select the “Remove Individual from Participant’s Plan > New File.”;

    b) Select the COBRA Participant subscriber file from the dropdown list;

    c) Select the individual that became Entitled to Medicare;

    d) Verify the Participant’s address and enter the last day the individual should be on the plan;

    e) Select the plan(s) that the individual should be removed from; and

    f) Click the Ok button.

    If the system cannot automatically determine, you may then be asked what tier/coverage type the remaining COBRA Participants will have after the removal of the individual. After the removal you will want to verify the billing information. The system will prompt you to send a notification informing the individual of their removal from the plan in the Things-to-do list. Double click on it and send the notification via USPS first class mail. Lastly, if there was a tier/coverage type change, you will want to send new coupons (or a letter detailing the new rates) to the remaining covered individuals.

  3. “Special Medicare Rule”

    Just when you thought you knew everything about how COBRA and Medicare interact, ERISA Section 602(2)(A)(vii) [and Treasury Regulation Section 54.4980B-7 Q?A -4(d)(1) ] changes everything. These sections of the law state the if an active employee is terminated (voluntarily or involuntarily) or experiences a reduction in work hours where there is a loss of coverage within 18 months of the employee’s Entitlement to Medicare;

    a) The employee should be offered the right to continue coverage for 18 months; but
    b) Covered dependents should be offered thirty-six months calculated from the date of the employee’s Entitlement to Medicare.

    The COBRA Administration Manager reviews the age of the employee at the time of the Qualifying Event and notifies the user when the employee is terminated or loses coverage to a reduction in work hours. The system will then create a COBRA Participant file for the employee providing 18 months of coverage and another file for the dependents. The dependent’s COBRA end date will be calculated by adding thirty-six months to the employee’ Medicare Entitlement date. You will notice that the system will change the number of months for COBRA to match the end date that was calculated. This number could be calculated to be between 19 and 36. Do not change it or it will change the correct COBRA end date.

  4. COBRA Participant Becomes Entitled to Medicare

    As we explained earlier, Medicare Entitlement is rarely considered a multiple qualifying event. When either an employee (or dependent of) is effective on COBRA and later becomes Entitled to Medicare, that individual “can” be terminated from continuation coverage. We are using the word “can” be terminated because by law they should be terminated from continuation coverage but we have found many Administrators allow these individuals to continue ancillary plans (i.e. dental, vision, etc.) if the carrier agrees to continue coverage.

    Your COBRA software will notify you when individuals reach age 65 and become Entitled to Medicare. Please follow the instructions found under item #2 to remove them from continuation coverage.

  5. Medicare Entitled Active Employee Experiences Qualifying Event

    Should an active employee age 65+ (who is enrolled under Medicare) be offered COBRA when they are terminated or lose coverage due to reduced work hours? In the previous paragraph we described how individuals should be remove when they are enrolled on COBRA and become eligible for Medicare so it only makes sense that you would not offer a Medicare covered employee COBRA when they experience a qualifying event. WRONG. The law states that the employer-sponsored plan may cover items that Medicare does not. For this reason, employers must offer these individuals COBRA continuation.

  6.  COBRA Participant Receives “Disability Extension”

     Although not directly related to Medicare, the reason for allowing a disabled COBRA Participant an additional eleven months of continuation coverage is to provide time to obtain Medicare. If a Qualified Beneficiary is deemed disabled prior to their sixtieth day on COBRA, notified the Administrator within sixty days of Social Security Administration’s (SSA) Disability Determination and provides that determination prior to the end of their 18 months on COBRA, they should be offered an eleven month Disability Extension. All members of the family unit should be granted the extension as well. If the disabled individual is no longer considered by SSA or becomes Entitled to Medicare, they may be removed from the plan.

Hopefully this description of COBRA and Medicare interaction will aide you in your administration. Please refer to it when you come across one of the above scenarios. If you are still unsure, feel free to call COBRA solutions for assistance.