COBRA payments After initial paid

[Guest Jet352]

I'm a bit confused about our TPA's response to a COBRA payment question we recently encountered.

Situation:

Employee Terminated 12/15, received COBRA notice and submitted election on 12/23 sending payment that covered 12/16 until 12/31. The TPA's COBRA election form reminded employee that payments were due on the first of month with 30 day grace period. Employee has not made any payments since the one received by TPA on 12/28.

On 12/28 our TPA sent Employee a letter stating the employee had received the payment and that the next payment was due on or before 2/19/2005. ????

When I questioned the TPA about this, they insisted that the employee had, at a minimum of the end of their 60 days of election to pay for their election.

I reminded them that he had, in fact, made the election and paid for the election he made back in December.

According to the DOL website:

"The initial premium payment must be made within 45 days after the date of the COBRA election by the qualified beneficiary. Payment generally must cover the period of coverage from the date of COBRA election retroactive to the date of the loss of coverage due to the qualifying event. Premiums for successive periods of coverage are due on the date stated in the plan with a minimum 30-day grace period for payments. Payment is considered to be made on the date it is sent to the plan."

If that is the case, wouldn't the "successive period" have been the January 1 premium with the grace period for 1/30? TPA claims that their COBRA program is set to comply with all regulations and they follow it's lead.....They are insistant that the employee, despite their payment for the period retroactive to their election back in December, still has until 2/19 to pay more so his insurance is still active. We will soon be out of time to retoractively cancel the policy back to the last payment.

Am I misreading the DOL explanation?

Help!

[QDROphile]

Don't screw with COBRA, it is simply not worth the risk. Interpret most favorably to the former employee, which means that earlier payments do not shorten any deadlines or create any new deadines that can cause eligibility or coverage to end sooner, compared to what the law allows in situations where there has been no election or payment.

[Guest Jet352]

So what you are suggesting is that, regardless of when he elected COBRA, he would still have, at minimum the 60 days after the notification for payment (and not 45?) 45 days after election would have been 2/6

[QDROphile]

The tax regulations are very clear that a plan cannot require payment for any period of coverage earlier than 45 days after the election to continue, so no payment deadline could expire before. The regulations say that once the election is made, you are on a 45 day clock.

However, if the 45 day payment period or any 30 day payment period expires within the 60 day election period, I am not aware of any authority that adresses an argument that as long as the election period is open, the employee could elect coverage even though an earlier election was made and then either expressly or implicitly withdrawn withdrawn or coverage based on that election was discontiuned. There is a conflict between right for a full 60 days to elect coverage and the right to terminate coverage if the premium is not paid within 45 days. You could send the notice of loss of coverage and then see what happens. But if the former employee tenders appropriate payment before the 60 day election period is over, do you want to be the test case? The employee could have waited 59 days to elect and then paid the first premium 45 days after that. Does that ability evaporate when the employee steps up sooner with an election? Maybe. How important is it to you to cut off coverage?

I have not tried to understand on what date the 60 day election period began. I have no comment on specific dates.

[jsb]

I'm in the camp of "Don't mess with COBRA". If your ee pays by the date specified by the TPA, you'd probably better accept it. If no payment, follow QDROphile's advice, send the loss of coverage letter and hope for the best.

With any luck, the ee didn't submit any big claims for late December. The ee paid (even though they could have let it "float") and probably now has other coverage. You are ahead by the 1/2 month of premium that was paid! Throw a party, thank your lucky stars, and move on.

[GBurns]

This should be of help in determining the 1st and subsequent premium dates:

http://www.onque.com/tips/first_premium.html

[Guest Jet352]

Great link.

Thanks! I now see that there are other ways of interpreting the election plus 45 days/ 30 days issue.

I guess I just can't handle a reponse that equals "that's what the computer says so that's why we do it that way".

[ERISAatty]

I respectfully beg to differ about the statements, above, to the effect that the 45-day grace period applies NO MATTER WHAT. I wrestled with this very issue, recently, and am now convinced that after the INITIAL premium is paid, the payments are due on the first of the month, with a 30 day grace period each month.

I now believe that it is best to advise those who elect COBRA NOT to make their first payment until almost 45 days after electing. Because if the first payment is made early in the process, the next payment will be due soon thereafter.

I have a client right now whose terminated employee is losing coverage because they didn't make their second payment early enough.

The citations for these rules (along with some of my analysis that I prepared recently) are as follows:

After the initial COBRA election, Treas. Reg. § 54.4980(b)-8, Q&A5(a) requires that the COBRA participant has 45-days to make a first payment. Once the initial premium payment was made in early February, however, the mandatory 45-day grace period with respect to the initial payments no longer applies. Instead, each payment after the initial payment is due on the first day of each monthly coverage period. Federal law requires that a 30-day grace period apply to each payment due on the first day of the monthly coverage period. So long as a monthly premium is paid within each month’s 30-day grace period, coverage will not be terminated for failure to make a timely payment. Internal Revenue Code § 4980B(f)(2)(B)(iii).

Some employers rely on the alternative language option in the COBRA election notice, and provide that if a monthly payment is made later than the first day of the month to which it applies, but before the end of the applicable 30-day grace period, coverage under the health plan will be suspended as of the first day of the month and then retroactively reinstated (going back to the first day of the month) when the monthly payment is received. This means that any claim submitted for benefits while the coverage is suspended may be denied and may have to be resubmitted once the coverage is reinstated. Since the model COBRA notice provides for this suspension, it seems to be OK with the DOL.

The EBIA book, COBRA: The Developing Law, also states that after the first payment is made, the premiums are generally due on the first day of the month.

[GBurns]

Jet352

What puzzles me in this issue is your concern that "We will soon be out of time to retoractively cancel the policy back to the last payment." It seems that you are seeking a way to cancel the coverage, Why?

Your OP quoted from the DoL that "Premiums for successive periods of coverage are due on the date stated in the plan " and that your TPA had calculated a particular date based on their interpretation of your PD. You, on the other hand have made no reference to whatever it is that your PD actually states on this issue.

If your selected TPA has read and interpreted your PD as allowing a certain date, What is the reason for questioning the decision of your TPA?

Do you as a matter of standard operating practice question the claims adjudication and other decisions of this TPA?

If not, it makes me wonder why you are singling out this particular employee and searching for a stricter interpretation of whatever rules apply even beyond your own PD. Have claims been submitted that you do not want to pay?

By the way, the DoL rules are the minimum required. Any insurance policy or health plan can have a longer grace period, can waive premiums and can allow whatever reinstatement priviliges if allowed by the policy or PD. No one has to stick to the COBRA minimums.