Whiplash: The Orderly and Disorderly End to the COVID-19 Declarations
- The early termination of the COVID-19 national emergency leaves employers wondering when certain employee benefit design changes can be rolled back.
- IRS Notice 2020-15, allowing sponsors of high-deductible health plans (HDHPs) to offer first-dollar coverage for COVID-19 testing and treatment without disrupting the participant’s ability to contribute to a health savings account, will remain in effect until the IRS issues contrary guidance.
- COBRA premium arrearages may pose an administrative issue and require prospective discussions with the relevant administrators.
The Bottom Line
In new tri-agency FAQ guidance issued on March 29, 2023, the Departments of Labor, Treasury, and Health and Human Services (Departments) provide an expanded discussion of how the anticipated end of the COVID-19 national emergency and public health emergency declarations (Declarations) will impact employee benefit plan design and administration. Days later, President Biden approved a Congressional Joint Resolution that abruptly ended the national emergency declaration on April 10, 2023—a month earlier than previously announced. The public health emergency, on the other hand, remains in effect and is expected to terminate on May 11, 2023.
This Alert highlights some of the key points that plan sponsors should review as the end of the Declarations approaches.
Impact of the National Emergency Declaration’s Termination
As explained in the FAQ guidance, not all temporary plan design requirements are tied to the national emergency declaration. For example, the requirement to cover out-of-network and over-the-counter COVID-19 testing is linked to the public health emergency declaration, which remains in effect.
By contrast, the guidance suspending many key ERISA and COBRA deadlines relies on the timing of the “Outbreak Period,” which is defined as the period ending 60 days following the end of the national emergency declaration. A strict reading of the original Outbreak Period guidance suggests that this period ends 60 days from April 10, 2023—i.e., the date that the national emergency ended. However, the recent tri-agency FAQ guidance (which was issued prior to the end of the national emergency declaration) states that the Outbreak Period will end 60 days from May 11, 2023, and it has been reported that the Department of Labor continues to adhere to that position. Further guidance from the Departments would be welcome to clarify how the FAQ guidance coordinates with the early end of the national emergency declaration.
Regardless of when the Outbreak Period ends, the new FAQ guidance offers examples of the administrative impact associated with the suspension of COBRA deadlines during the Outbreak Period. In particular, it answers important questions regarding the effect of premium deadlines becoming “unfrozen” when the Outbreak Period ends.
In an example provided in the guidance, a participant elected COBRA effective October 1, 2022, but did not submit any payment for this coverage. The Departments explain that this participant would be responsible for paying 10 months of COBRA premiums 45 days following the end of the Outbreak Period. Notably, the guidance is silent as to the practical impact of requiring a participant to pay nearly a full year’s worth of COBRA premiums all at once. Depending on the tier of coverage, this cumulative bill could easily exceed $20,000. If the participant fails to pay this amount, the plan could theoretically cancel coverage retroactively back to October 1, 2022, and reprocess any claims incurred during that time.
Accordingly, plan sponsors are encouraged to:
- consult with their COBRA administrator to determine whether any premium arrearages have built up during the Outbreak Period;
- consider whether to allow large balances to paid over time or require the full amount to be paid on the due date;
- determine whether coverage will be retroactively terminated for non-payment, keeping in mind ERISA’s fiduciary obligation to recover overpaid plan benefits as well as practical implications; and
- prospectively communicate to participants with COBRA premium arrearages to let them know the due date for their balances.
Coordination With Heath Savings Accounts
IRS Notice 2020-15 allowed sponsors of high-deductible health plans (HDHPs) to offer first-dollar coverage for COVID-19 testing and treatment without disrupting the participant’s ability to contribute to a health savings account (HSA). Unlike much other COVID-19 guidance, the relief provided by Notice 2020-15 was not directly tied to the duration of either of the Declarations.
The new FAQ guidance confirms that Notice 2020-15 will remain in effect beyond the end of the Declarations until the IRS issues contrary guidance. This means that HDHP coverage may continue to pay the cost of COVID-19 testing and/or treatment before the participant’s deductible has been satisfied. Be aware, however, that plan sponsors are not required to provide first-dollar coverage for COVID-19 testing and treatment; as explained later in this Alert, this coverage is purely voluntary.
Communicating Benefit Plan Changes
The guidance includes a reminder that if these mid-year design changes impact the content of the Summary of Benefits and Coverage (SBC), the plan or issuer must provide advance notice of the modification at least 60 days prior to the date that the change will become effective. While most of the plan design changes associated with the end of the Declarations will not be reflected in the SBC, plan sponsors should review their SBCs to determine whether they are subject to the 60-day advance notice requirements. For example, if the SBC states that the plan provides first-dollar coverage for COVID-19 testing and treatment, the plan would need to provide 60 days’ advance notice prior to removing that design feature.
As a technical matter, plan design changes that do not impact the content of the SBC are subject to ERISA’s standard relaxed timeframes for communicating plan changes – i.e., 210 days after the end of the plan year in which the change is adopted or, in the case of a material reduction in benefits, 60 days after the change is adopted. However, to avoid participant confusion, plan sponsors should consider providing contemporaneous notice of these changes, either in the form of a summary of material modifications or an updated summary plan description.
Plan sponsors should also work with their outside counsel to determine whether these mid-year changes are significant enough to warrant mid-year pre-tax election changes pursuant to Section 125.
Special Enrollment Elections for Medicaid Beneficiaries
Many individuals are expected to lose eligibility for Medicaid benefits in the coming months and may be entitled to special enrollment elections under employer-sponsored plans if they are eligible. As with the COBRA deadlines, the extension for special enrollment elections will be expiring when the Outbreak Period ends. Plan sponsors may wish to be on the alert for individuals who seek to enroll for coverage as a result of a loss of eligibility for Medicaid or CHIP benefits.
Lastly, plan sponsors should be aware that the FAQ guidance is replete with various non-binding recommendations from the Departments. For example, plans and issuers are “encouraged” to continue to providing first-dollar coverage for OTC and out-of-network COVID-19 tests—even though such coverage is no longer required after the Declarations end. Additionally, the guidance states that plans and issuers are encouraged to continue to suspend key benefit plan deadlines (such as the time for filing claims and making COBRA payments) after the Outbreak Period ends.
Plan sponsors should be aware that even though these recommendations appear in boldface type throughout the FAQs, they are not binding, and there are no penalties associated with disregarding this portion of the guidance. In fact, some of these recommendations could result in significant costs and increased administrative burdens for self-funded plans.
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