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On April 7,
2021, the DOL released FAQs and model notices regarding COBRA and state
continuation premium subsidies for assistance eligible individuals (AEIs)
under the American Rescue Plan Act of 2021 (ARPA).
ARPA gives an
enrollment opportunity for individuals who’ve already experienced an
involuntary termination of employment or any reduction in hours within
the last 18 months and did not timely elect COBRA or have dropped COBRA.
These individuals will have a brand new 60-day election window following the
date that they receive a new required COBRA notice. In addition,
employers may allow AEIs to change elections to other plan options that
have the same or lower cost premiums (optional).
The subsidy will
be refunded by the federal government via payroll tax credits, which will
last a total of 6 months, beginning on April 1, 2021 and ending on
September 30, 2021. The assistance may end sooner if the qualified
beneficiary’s maximum COBRA coverage period ends or if the participant is
eligible for another group health plan or Medicare.
The FAQs provide
much clarification, and employers may use the model notices to satisfy
the new notice requirements. Listed below are some of the clarifications:
Q&A#2: To which plans does the subsidy apply?
The DOL clarifies that the subsidy applies to all group health plans
subject to COBRA either under ERISA or under the PHSA (which generally
applies to state and local governmental plans). In addition, it makes
clear that subsidized coverage extends to state continuation mini-COBRA
laws. Although not noted in the FAQ, standalone dental or vision plans
are subject to the subsidy provisions, however health FSAs are
specifically excluded.
Q&A#3: Who is an assistance eligible
individual (AEI)? This explains that in order for an individual to be
eligible for the subsidy, they must have lost coverage due to either an
involuntary termination of employment (not gross misconduct) or any
reduction of hours, and are not otherwise eligible for other group health
plan coverage or Medicare.
Examples are
given to describe a reduction in hours which include, reduced hours due
to change in business hours, move from full-time to part-time, taking a
temporary leave of absence, or a lawful labor strike, as long as the
individual remains an employee at the time the hours are reduced. Thus,
it is clear that any reduction in hours that causes a loss of eligibility
for coverage would likely trigger a subsidy for that individual.
Examples are
also provided to describe eligibility for other group health plan
coverage, which include a new employer’s plan or spouse’s group plan.
However, other group coverage cannot consist of only excepted benefits, a
QSEHRA or health FSA.
In addition, the
FAQ confirms that if someone has an individual health plan through the
Exchange or Medicaid, they may still be eligible for subsidized COBRA or
state continuation. However, if they enroll in subsidized COBRA, they
will no longer be eligible for a premium tax credit (PTC) during the
coverage period. A new special enrollment period will open on the
Exchange as a result of losing subsidized COBRA coverage.
Q&A#5: Who is eligible for the new election
opportunity? The DOL confirms that AEIs who either did not elect COBRA
when it was initially offered or elected it but later dropped COBRA, and
are still within their 18 month COBRA period as of April 1st, would still
be eligible for a second chance to enroll. They must be notified by May
31, 2021 of this opportunity, and have 60 days to elect COBRA. Coverage
may be prospective, or may be chosen to retroactively enroll as of April
1, 2021 even if their election is made at a later date.
Q&A#5, 10
and 13: Will ARPA COBRA
timelines follow outbreak period extensions? The DOL clarifies that the
COVID-19 extensions for notice or election deadlines will not apply to
the listed ARPA subsidy election and notification timelines put in place.
Q&A#9: Will the 2% administrative fee be paid
by the AEI? AEIs will not pay any part of their COBRA premium, including
any administrative fees. Therefore, the subsidy will cover 102% of the
COBRA premium typically charged.
Q&A#16: Are enrolled family members included in
the subsidy? The DOL confirms that each family member who lost coverage
as a result of the employee’s involuntary termination of employment or
reduction of hours would also be an AEI, even if only one family member
elected COBRA when first eligible.
Lastly, the DOL
has issued several model notices employers may use to comply with ARPA
subsidies. These notices include:
1. An election notice to be provided to
qualified beneficiaries who are AEIs;
2. A notice about the extended election
period to be provided to AEIs currently enrolled in COBRA or would be if
they had elected or continued paying for COBRA;
3. An alternative notice to be provided by
fully-insured plans subject to state continuation;
4. A subsidy expiration notice that must be
sent at least 15 days before an AEI’s subsidy expires;
5. A summary of the subsidy provisions,
which is to be attached to the general notice and includes a form an
individual can use to request to be treated as an AEI, or give notice of
eligibility for other group coverage or Medicare.
DOL COBRA
Premium Subsidy webpage with FAQs and model notices: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy
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