Background
ARPA created a COBRA subsidy for assistance eligible individuals (AEI). Employees who lost their jobs involuntarily or had a reduction in work hours resulting in a loss of health insurance benefits are considered AEIs and are eligible for the subsidy. The separation or reduction in hours does not need to be COVID-19 related to qualify for the subsidy.
The subsidy period runs from April 1, 2021 to September 30, 2021. The subsidy covers 100 percent of an AEI’s COBRA costs during that time period. AEIs do not have to pay any of the COBRA premiums for the period of coverage from April 1, 2021 through September 30, 2021. The employer, insurance company, or plan administrator to whom COBRA premiums are usually payable will be entitled to a tax credit for the amount of the premium assistance.
The subsidy is also available to AEIs currently enrolled in COBRA. If an AEI previously opted not to enroll in COBRA, but now desires to enroll due to the availability of the subsidy, there will be a special election period to sign up for COBRA coverage (see below).
An AEI loses eligibility for the subsidy upon the earliest of the individual becoming eligible for other group health plan coverage or Medicare, or the expiration of the individual’s maximum COBRA period. Individuals are required to notify their group health plan if they become eligible for other coverage during the subsidy period and are subject to penalties if they fail to do so.
Under ARPA, employers may elect to allow terminated employees the option to enroll in different group health plans offered by the employer. The premium for such alternative coverage choice cannot be higher than the premium for the plan in which the employee had been enrolled, among other restrictions.
For more information, the DOL also issued an FAQ regarding the new subsidies.
Special Enrollment Period
As mentioned above, under the ARPA, a terminated employee who is eligible for assistance and who had not elected COBRA coverage prior to April 1, 2021, or who elected COBRA coverage but then discontinued it, may elect COBRA coverage during a special enrollment period starting April 1, 2021 and ending 60 days after the date on which the COBRA notification was delivered. Employers or plan sponsors must send a special enrollment notice to eligible individuals by May 31, 2021. The DOL’s model notice (see below) may be used.
Other Notice Requirements
The DOL published five new model forms and notices:
- The Model ARP General Notice and COBRA Continuation Coverage Election Notice temporarily replaces the Model Election Notice, and is to be used for new qualified beneficiaries from April 1, 2021 to September 30, 2021.
- The Model COBRA Continuation Coverage Notice in Connection with Extended Election Periods is to be provided to those already enrolled in COBRA or those who were terminated earlier and who did not elect COBRA but could have and who may now elect to be enrolled in subsidized COBRA. This form should be sent to eligible former employees by May 31, 2021.
- The Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021 must be included with each of the above forms when sent to employees.
- The Notice of Expiration of Period of Premium Assistance is to be sent 15 to 45 days prior to the expiration of premium assistance.
- The Model Alternative Notice of ARP Continuation Coverage Election Notice may be used for coverage subject to state continuation requirements between April 1, 2021 and September 30, 2021.
As with most model forms, these forms will need to be customized and completed with information particular to the employer to fully comply with COBRA notice requirements. The forms may be accessed here.
During the subsidy period, COBRA notice forms, whether amended or issued as a separate document, must include:
- The forms necessary to establish eligibility for COBRA premium assistance.
- The name, address and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with premium assistance.
- A description of the extended election period provided by the legislation.
- A description of the option to enroll in different coverage, if adopted by the employer.
The penalty for non-compliance with the new notice requirements is $100 per qualified beneficiary (maximum of $200 per family) per day.
Employers with questions regarding the COBRA subsidy or new COBRA model forms may contact Jonathan Judge at (562) 653-3200 or via email at jjudge@aalrr.com.
