So what happens during these timeframes?
During the election period it is up to each employer to decide whether to remove the qualified beneficiary from the plan when coverage is lost, or allow the qualified beneficiary continue on the plan. If removed from the plan, COBRA coverage could be pending until payment is received. The employer is then responsible to reinstate coverage back to the original loss-of-coverage date once payment is received. Before an employer chooses to keep the qualified beneficiary on the health plan during these grace periods, there are a few aspects to contemplate. If a group health plan is insured, how far back will the insurer allow the retroactive removal of a qualified beneficiary by the employer? Some insurers may not allow the removal to go back more than 60 days. If you add up the three time frames allowed (which would be 44 + 60 + 45) you end up with almost a five month period. If an insurer allows the removal back to only 60 days, the employer will be self-insuring the period that the insurer does not allow. Consequently, it is recommended that the qualified beneficiary be removed from the plan and only reinstated if payment is received. In the case that an employer desires to keep a qualified beneficiary on the plan, it should review the process with the insurer. Upon approval by the insurer to retroactively remove a qualified beneficiary to the original loss-of-coverage date when an election and payment has failed to be received, it is prudent for the employer to obtain confirmation in writing.
How about monthly grace periods for premium payment? This period has to be at least 30 days and most employers hold it to that timeframe. So, if the qualified beneficiary does not pay the monthly premium within the 30 day grace period, the insurer will allow retro-active removal from the plan without any issues. In some cases, insurers will remove qualified beneficiaries each month until premium has been received. Upon receipt of payment, a plan must promptly reinstate coverage; thereby the qualified beneficiary receives coverage for the entire month. This can be a very complicated process to administrate because when a qualified beneficiary is removed each month, claims are denied. As soon as the premium payment is received, however, claims have to be processed.
What about denied claims that a qualified beneficiary has during these grace periods? First of all, claims during the election period or grace period could potentially be denied. Once the qualified beneficiary pays for COBRA coverage, the denied claims can be resubmitted upon reinstatement onto the plan.
What is the correct response when someone contacts the employer or plan administrator about health plan status during these grace periods? According to the IRS final COBRA regulations, a complete response is required to a health care provider’s request regarding a qualified beneficiary’s coverage status during the election and initial payment periods. This means that just a covered or a not covered response will not suffice. To respond to a coverage pending election, the employer can indicate that a qualified beneficiary is removed from the plan during the 60-day election period and then reinstated once COBRA is elected and first payment is received. It is wise to inform the provider’s office of this status, as well as to let them know the qualified beneficiary is not currently on the plan but will have coverage, retroactively, once COBRA coverage is elected and the first payment is received. This notification should include specific dates of election period and premium due dates.
So what is the response if the qualified beneficiary is not removed during the election/payment period? This other option is appropriate if the plan allows coverage during the election period but cancels it retroactively if COBRA is not elected. In this case, the plan or administrator is required to notify a provider that the qualified beneficiary is covered but is subject to retroactive termination if COBRA coverage is not elected and the appropriate premiums are not paid. As part of the information given to the provider, specific election and payment dates should be included.
To avoid liability or litigation, accurate information should be given to a health care provider requesting a qualified beneficiary’s coverage status. Because COBRA is an employer law, the burden of liability may belong to the employer rather than an insurer. Any inquiries regarding health coverage should be handled by the employer or plan administrator rather than the insurer.
Remember one final factor. Unlike criminal law where the test is "beyond a reasonable doubt" and civil law where decisions are based on "the preponderance of evidence", this is employment law. The basis is much different. The employer is presumed guilty and has the full weight of proving to an employee (current or former) that the employer "did not do" whatever is alleged by the charging party. This is true in EEOC, DOL and FLSA proceedings ... not just COBRA.