COBRA Deferred Loss of Coverage

I'm curious about others' experience with the deferred loss of coverage rules under COBRA and how most people measure the coverage period.

For a simple example, an employee terminates employment on May 2, 2024. By the terms of the fully insured policy, coverages ends on May 31, 2024. In my experience, most plan sponsors would continue "active" coverage through May 31, then send a COBRA notice stating that they are eligible for COBRA starting on June 1, 2024 (and ending 18 months from June 1  and not from  May 2 ).

As I read the regulations, the COBRA rules default to an 18-month period based on the date of the qualifying event (here, termination) even if the loss of coverage occurs on a later date. However, the regulations  allow  plans to measure the 18-month COBRA period based on the date of the loss of coverage following the qualifying event.

A quick skim of most available wrap plan documents and policies either don't squarely address the issue or simply state that participants are eligible for COBRA based on a qualifying event without additional clarity (maybe by design).

In practice, though, I have found that starting a full 18-month COBRA period on the day after the loss of coverage (June 1, in the example above) is far more prevalent, whether intentionally following the regulation or just out of routine. 

Am I wrong?

I find that aspect of the COBRA regs to be way more technical than it needs to be because it's so common to have coverage run through the end of the month, with the 18-month maximum coverage period beginning as of the first of the following month. 

The rules say you can measure from the date of loss of coverage (rather than the date of the triggering event) if the plan states that the 30-day notice period to notify the plan administrator (who then has 14 days to notify the employee) and that the maximum coverage period is measured from that loss of coverage date (instead of the date of termination of employment or other triggering event).

I find this somewhat misaligned with the real world because:

• From my brief experience at the DOL, they enforce this based solely on the date of loss of coverage;
• They also didn't care about he 30/14 day distinction since it's usually the same entity anyway, they just enforced as a combined 44 day limit from loss of coverage; 
• Most employers are using template documents, and it's unlikely those documents are customized for something as intricate as this; and
• The rules are clear that it's fine to have a longer maximum coverage period than is required by law.  So are they really going to punish an employer for being more generous without perfectly clarifying in the plan terms?

Our template doc does try to address this issue with some generic language:

"(If coverage is lost at a date later than the date of the qualifying event and the Plan measures the maximum coverage period and notice period from the date of health coverage loss, then the maximum continuation period will be 18 months from the date of health coverage loss.)"

Not perfectly customized, but at least it tackles the issue.

Here's the regs:

Treas. Reg. §54.4980B-7:

Q-4.  When does the maximum coverage period end?

A-4. (a) Except as otherwise provided in this Q&A-4, the maximum coverage period ends 36 months after the qualifying event. The maximum coverage period for a qualified beneficiary who is a child born to or placed for adoption with a covered employee during a period of COBRA continuation coverage is the maximum coverage period for the qualifying event giving rise to the period of COBRA continuation coverage during which the child was born or placed for adoption. Paragraph (b) of this Q&A-4 describes the starting point from which the end of the maximum coverage period is measured. The date that the maximum coverage period ends is described in paragraph (c) of this Q&A-4 in a case where the qualifying event is a termination of employment or reduction of hours of employment, in paragraph (d) of this Q&A-4 in a case where a covered employee becomes entitled to Medicare benefits under Title XVIII of the Social Security Act (42 U.S.C. 1395-1395ggg) before experiencing a qualifying event that is a termination of employment or reduction of hours of employment, and in paragraph (e) of this Q&A-4 in the case of a qualifying event that is the bankruptcy of the employer. See Q&A-8 of §54.4980B-2 for limitations that apply to certain health flexible spending arrangements. See also Q&A-6 of this section in the case of multiple qualifying events. Nothing in §§54.4980B-1 through 54.4980B-10 prohibits a group health plan from providing coverage that continues beyond the end of the maximum coverage period.

(b)(1) The end of the maximum coverage period is measured from the date of the qualifying event even if the qualifying event does not result in a loss of coverage under the plan until a later date. If, however, coverage under the plan is lost at a later date and the plan provides for the extension of the required periods, then the maximum coverage period is measured from the date when coverage is lost. A plan provides for the extension of the required periods if it provides both—

(i) That the 30-day notice period (during which the employer is required to notify the plan administrator of the occurrence of certain qualifying events such as the death of the covered employee or the termination of employment or reduction of hours of employment of the covered employee) begins on the date of the loss of coverage rather than on the date of the qualifying event; and

(ii) That the end of the maximum coverage period is measured from the date of the loss of coverage rather than from the date of the qualifying event.

(2) In the case of a plan that provides for the extension of the required periods, whenever the rules of §§54.4980B-1 through 54.4980B-10 refer to the measurement of a period from the date of the qualifying event, those rules apply in such a case by measuring the period instead from the date of the loss of coverage.

Thanks Brian. Very helpful, as always.