FAQs About COBRA Premium Assistance Under the American Rescue Plan Act of 2021 (Apr. 7, 2021); Model ARP General Notice and COBRA Continuation Coverage Election Notice; Model COBRA Continuation Coverage Notice in Connection With Extended Election Periods; Model Alternative Notice of ARP Continuation Coverage Election Notice; Model Notice of Expiration of Period of Premium Assistance; Summary of COBRA Premium Assistance Provisions Under the American Rescue Plan Act of 2021
The DOL has issued model notices and FAQs on the 100% COBRA premium subsidy available under the American Rescue Plan Act of 2021 (ARPA) (see our Checkpoint article). The subsidy is available from April 1, 2021 through September 30, 2021, to assistance eligible individuals (AEIs) who are eligible for and elect COBRA coverage—or comparable state continuation coverage—because of their own or a family member’s reduction of hours or involuntary termination of employment. The FAQs provide general information and clarifications, while the model notices provide templates to help employers satisfy new notice requirements. Here are highlights:
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Eligible Individuals. Q/A-3 makes clear that, to trigger eligibility for the subsidy, an AEI’s qualifying event must be (1) an involuntary termination of employment; or (2) a reduction of hours, whether involuntary or voluntary. Individuals who are eligible for Medicare or other group health coverage (excluding excepted benefits, QSEHRAs, or health FSAs) are not eligible for the subsidy. And employees terminated for gross misconduct are ineligible for both COBRA and the subsidy. [EBIA Comment: As always, we recommend caution before denying COBRA (or the subsidy) based on a determination of gross misconduct.] Eligibility for or enrollment in Medicaid or coverage under an Exchange does not disqualify an individual from subsidy eligibility (but the premium tax credit for Exchange coverage will no longer be available).
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Eligible Plans. Q/A-2 emphasizes that the subsidy provisions apply to all group health plans subject to the COBRA rules under ERISA or the PHSA, as well as group health insurance required under state mini-COBRA laws. [EBIA Comment: Although not noted in the FAQ, excepted benefits such as stand-alone dental or vision plans are subject to the subsidy provisions; health FSAs are specifically exempt.]
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Extended Election Period. Q/A-5 explains that qualified beneficiaries who experienced a reduction of hours or involuntary termination of employment prior to April 1, 2021, but either did not elect COBRA when it was first offered or elected COBRA but later dropped it, are eligible for an additional election period. Such individuals must be notified of this opportunity by May 31, 2021, and have 60 days after the notice is provided to elect COBRA. Individuals can begin their coverage prospectively from the date of their election, or choose to start their coverage as of April 1, 2021, even if they receive notice and make their election at a later date.
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Outbreak Period Extensions. Q/As-5, -10, and -13 clarify that the COVID-19 outbreak period extensions (see our Checkpoint article) do not apply to the notice or election deadlines related to the ARPA subsidy.
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Administrative Fees. Q/A-9 confirms that AEIs will not need to pay any part of what would otherwise be paid for COBRA coverage, including administrative fees. [EBIA Comment: This means that the subsidy will cover the 2% administrative fee that is typically included in the COBRA premium.]
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Notices. Q/As-10 and -11 describe the notices that plans must provide to AEIs, list information that must be included, and remind employers that failing to provide the notices could result in excise taxes under the Code. Model notices provided by the DOL include (1) a general notice about the subsidy including an election notice to be provided to qualified beneficiaries with qualifying events occurring from April 1, 2021, through September 31, 2021; (2) a notice about the extended election period to be provided to AEIs currently enrolled in COBRA and those who would be AEIs if they had elected or maintained COBRA; (3) an alternative notice to be provided by insured plans subject to state continuation requirements; (4) a subsidy expiration notice to be provided 15–45 days before an AEI’s subsidy expires; and (5) a summary of the subsidy provisions, which is to be attached to the general notice and includes a form by which an individual may request to be treated as an AEI or give notice of eligibility for other coverage. [EBIA Comment: The model notices may require editing. For example, the general notice refers to an AEI’s ability to switch to another coverage option, which may be confusing to AEIs whose employers do not allow that option.]
EBIA Comment: The ARPA subsidy period has already begun, and notice deadlines are fast approaching, so plan administrators and their advisors will welcome the model notices. While the FAQs provide needed clarification on certain issues, open questions remain. It will be important to watch for further guidance, as it may impact decisions such as who should receive the notices. For more information, see EBIA’s COBRA manual at Section VI.H (“ARPA Premium Subsidy”). If you missed our webinar “Another COBRA Subsidy! Compliance Steps to Take Immediately,” presented by Howard D. Bye-Torre, Esq. and Andrew Ky Haynes, Esq. on 4/7/2021, the recording is now available.
Contributing Editors: Thanks to Howard D. Bye-Torre for his contributions to this article, with final editing by EBIA Staff. Mr. Bye-Torre is an attorney with Stoel Rives LLP in Seattle. He is a Contributing Author of EBIA’s COBRA: The Developing Law and many other EBIA publications.
