IRS Clarifies COBRA Premium Due Dates Under Outbreak Period Relief

On Wednesday, October 6, 2021, the IRS published Notice 2021-58 providing clarity around the Outbreak Period extensions in relation to COBRA continuation coverage.  “This notice clarifies that the disregarded period for an individual to elect COBRA continuation coverage and the disregarded period for the individual to make initial and subsequent COBRA  premium payments generally run concurrently.”  Here’s a breakdown of this clarifying guidance.

• If someone elected COBRA during their usual 60-day election window, then their initial premium payment that’s typically due 45 days following their election is extended to give them one year and 45 days after their election was submitted.
• If someone elected COBRA after the usual 60-day election window under Outbreak Period extension relief, then their initial premium payment is due one year and 105 days after their election notice was originally provided to them.
  • There may have been confusion that people thought when they submitted their election form after the initial 60 days, they had one year and 45 days from the date they eventually submitted their election to pay the first premium.  However, all original deadlines were supposed to be recognized and only given an additional year beyond what the original deadline would have been.  The original deadline would have been 60 days to elect plus 45 days to pay initial premium, so 105 days max.
  • “Therefore, to avoid inequitable outcomes, in no event will an individual be required to make the initial premium payment before November 1, 2021, even if November 1, 2021 is more than one year and 105 days after the date the election notice was received, provided that the individual makes the initial premium payment within one year and 45 days after the date of the election.”
• From there, each month’s subsequent premium payment is due one year following what the original payment due date (plus 30-day grace period) would have been.  This means it’s possible the first payment may have to cover not only the first month’s premium but perhaps one or two additional months as well.
  • For example, if someone was given a COBRA notice August 1, 2020, but did not elect COBRA during the initial 60 days, they would have until September 30, 2021 (one year and 60 days after August 1, 2020) to submit their election, and they would have until November 14, 2021 (one year and 105 days after August 1, 2020) to submit payment for August, September, and October 2020 premiums by that November 14, 2021, deadline.
    • The premium due September 1, 2020, would have had a 30-day grace period of October 1, 2020.  Add a year and that’s October 1, 2021, which pre-dates the initial payment being made by November 14, 2021, and therefore must be included in the initial premium payment in order to have September 2020 coverage.
    • Likewise, the premium due October 1, 2020, would have had a 30-day grace period of October 31, 2020.  Add a year and that’s October 31, 2021, which also pre-date the extended initial premium due date of November 14, 2021.  So to have October 2020 coverage, the initial premium payment must also include the October premium.
    • Assuming the individual’s initial payment by November 14, 2021, includes all three months of premium payments for Aug, Sept, and Oct 2020, then the November 2020 premium originally due November 1, 2020, would have had a 30-day grace period of December 1, 2020.  Add a year and that’s December 1, 2021, so the November 2020 premium does not have to be included with the initial premium payment by November 14, 2021, but can be delayed as late as December 1, 2021.

The guidance provides several examples to illustrate how this relief is intended to work.  At the end of the day, it’s not been terribly meaningful for someone to wait a long time to elect COBRA, as they won’t have “active” COBRA coverage that can be used for current medical care until they get all prior premiums caught up.  Any provider that calls to ask the plan about current COBRA coverage status would likely be told that claims would be pended or tentatively declined until back premiums are timely paid under the Outbreak Period extension relief.  Granted, in high cost situations, health care facilities have been known to pay someone’s COBRA premiums to ensure they are fully and timely paid by the health plan, so the clarifications above are still helpful.

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.