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Important information about continuing coverage and healthcare planning.
In response to the pandemic, the U.S. Department of Labor has extended the period of time a person can enable COBRA health insurance coverage after losing their employer-sponsored group health plan as a result of a layoff or a reduction of hours.
The rule extends most COBRA deadlines an additional 60 days after the end of the “outbreak period,” which started March 1,2020, and will end when the COVID-19 national emergency is declared over by federal authorities – or another date they may provide in future guidance.
That means, once the federal administration declares the national emergency over, laid-off workers would have an additional 60 days to elect COBRA coverage starting 60 days after the end of the national emergency. The new rule also extends the initial premium payment and grace period deadlines to beyond the outbreak period.
The COBRA extension is available only to people who worked for companies with 20 or more employees and had employer-sponsored coverage before being laid off or furloughed. It isn’t an option for people who are uninsured, self-employed or who
work for companies with fewer than 20 employees.
A HYPOTHETICAL EXAMPLE
Stanley participates in his employer’s group health plan. His company is adversely affected by the pandemic, so by the end of March, Stanley’s hours are reduced and he is no longer eligible for his employer-sponsored health plan. He receives his COBRA election notice on April 1, and may elect continuation coverage. He waits and does not elect coverage. Incidentally, the federal government declares the end of the national emergency on April 30. At that point, Stanley has 120 days to purchase COBRA continuation coverage or go without, meaning his deadline to decide is Aug. 28.
PLANNING CONSIDERATIONS
As with any decision to enroll in COBRA, you can take a “wait-and-see” approach to signing up after losing your coverage. If
you need care during that time, you could enroll in the COBRA plan, pay the back premiums and continue your coverage. But if you didn’t need care during that time, you could save money on premiums before opting for other coverage to kick in after the enrollment period ends.
Still, holding off on enrolling would not be without risk. If you experience a serious medical emergency you might not be able to process your COBRA paperwork before you need medical care. While COBRA may not always be the best option as it can be expensive compared to other health insurance options, it is never a good idea to go without health insurance. If COBRA is too expensive, the next step is to evaluate other sources of insurance.
Alternatively, you may consider:
• Joining your spouse’s employer-sponsored plan, if that option is available. This must be done within 30 days of separation from your coverage.
• Applying for coverage through the Affordable Care Act (ACA). There may be tax credits available depending on your level
of yearly income.
• Determining whether Medicaid is available if you do not have the financial resources to afford COBRA or to join your
spouse’s plan.
• Planning for 2021 to see if your income qualifies for ACA tax credits, then enroll in an ACA-based plan starting January 2021.
Keep in mind that if you enroll in COBRA coverage, you should begin to look for other coverage options as soon as possible as COBRA is only available for a limited amount of time. If your health deteriorates while on COBRA, you may be unable to get other insurance when the COBRA coverage runs out.
COBRA AND MEDICARE
If you have COBRA coverage before enrolling in Medicare, your COBRA coverage may end. This is because your employer or former employer has the option of canceling continuation coverage when Medicare entitlement begins. If you have only
Medicare Part A when your group health plan coverage ends, and you and your spouse are no longer actively working, it will be necessary to enroll into Medicare Part B even if you choose to continue employer group health coverage under COBRA.
Since coverage under COBRA is not based on current, active employment, Medicare would become your primary insurer. You have eight months from when your employment ends to enroll in Medicare Part B. This is called a special enrollment period. If you do not enroll within the special enrollment period, you may have to pay a Medicare Part B late premium penalty, and coverage would be delayed. You would only be able to enroll in Medicare Part B during the general enrollment period, January through March, and coverage would not begin until July. It’s best to be prepared. If you are approaching Medicare age, you should speak with your employer benefits administrator about your healthcare options if you were to be laid off or otherwise lose access to your employer’s group plan.
THE BOTTOM LINE
Good health insurance decisions take into account the cost of coverage, client health status, income and client preferences for health insurance.
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