Thirty-five years ago this month, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) was signed into law. COBRA provides a way for workers and their families to temporarily maintain their employer-provided health insurance during situations such as job loss or a reduction in hours worked.
The American Rescue Plan Act of 2021 (ARPA) included provisions providing a full COBRA subsidy to help pandemic-affected workers afford this health coverage. For more details on the COBRA provisions of ARPA see: American Rescue Plan Act of 2021 and COBRA Subsidies. The Department of Labor (DOL) Employee Benefits Security Administration (EBSA) has created a new webpage with resources for employers, advisors and workers about the COBRA premium assistance under ARPA.
COBRA Changes Under the American Rescue Plan Act (ARPA)
Under COBRA, an individual who was covered by a group health plan on the day before the occurrence of a qualifying event (such as a termination of employment or a reduction in hours that results in loss of coverage under the plan) may be able to elect COBRA continuation coverage upon that qualifying event. Individuals with such a right are referred to as “qualified beneficiaries.”
Starting April 1, 2021, eligible workers and family members do not have to pay COBRA premiums through the end of September. Group health plans and health insurance companies play a crucial role in letting participants and beneficiaries know that they are possibly eligible for this continuation of health coverage at no cost to them through September 31, 2021. DOL has developed model notices for use by group health plans and health insurers that, pursuant to ARPA, must provide notices of the availability of premium reductions and additional election periods for COBRA continuation coverage.
Recent DOL FAQs focus on what COBRA participants and beneficiaries need to know about premium assistance. These answers could help benefit professionals who field questions from their participants and beneficiaries or who are responsible for identifying those employees who should receive the notices.
How can I [a worker] tell if I am eligible to receive the COBRA premium assistance?
The ARPA makes the premium assistance available for “assistance eligible individuals.” An assistance eligible individual is a COBRA qualified beneficiary who meets the following requirements during the period from April 1, 2021 through September 30, 2021. The qualified beneficiary:
- Is eligible for COBRA continuation coverage by reason of a qualifying event that results in a reduction in hours (such as reduced hours due to change in a business’s hours of operations, a change from full-time to part-time status, taking a temporary leave of absence, or an individual’s participation in a lawful labor strike as long as the individual remains an employee at the time that hours are reduced) or an involuntary termination of employment (not including a voluntary termination); and
- Elects COBRA continuation coverage.
However, you are not eligible for the premium assistance if you are eligible for other group health coverage, such as through a new employer’s plan or a spouse’s plan (not including excepted benefits, a qualified small employer health reimbursement arrangement (QSEHRA), or a health flexible spending arrangement (FSA)), or if you are eligible for Medicare.
Note that if you have individual health insurance coverage, like a plan through the Health Insurance Marketplace® or if you have Medicaid, you may be eligible for ARPA premium assistance. However, if you elect to enroll in COBRA continuation coverage with premium assistance, you will no longer be eligible for a premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit for your health coverage during that period. If the employee’s termination of employment was for gross misconduct, the employee and any dependents would not qualify for COBRA continuation coverage or the premium assistance.
How do I apply for the premium assistance?
If you were covered by an employment-based group health plan on the last day of your employment or a family member’s employment (or the last day before you or your family member’s reduction in hours causing a loss of coverage), the plan or issuer should provide you and your beneficiaries with a notice of your eligibility to elect COBRA continuation coverage and to receive the premium assistance. The notice should include any forms necessary for enrollment, including forms to indicate that you are an assistance eligible individual and that you are not eligible for another group health plan or Medicare (not including excepted benefits, a QSEHRA, or a health FSA).
What if I believe I am (or may be, upon a COBRA election) an assistance eligible individual and have not received a notice from my employer?
If you believe you are an eligible individual and want to elect COBRA continuation coverage with temporary premium assistance, complete the “Request for Treatment as an Assistance Eligible Individual Form” that is attached to the Summary of the COBRA Premium Assistance Provisions Under the ARPA With Supplemental Disclosures (see pages 2-3). Return this form to the health plan with your completed election form.
If you are an assistance eligible individual, the ARPA provides that you must be treated, for purposes of COBRA, as having paid in full the amount of any premiums from April 1, 2021 through September 30, 2021. Accordingly, plans and issuers should not collect premium payments from assistance eligible individuals and subsequently require them to seek reimbursement of the premiums for periods of coverage beginning on or after April 1, 2021 and preceding the date on which an employer sends an election notice, if an individual has made an appropriate request for such treatment.
How will the premium assistance be provided to me [an eligible individual]?
You will not receive a payment of the premium assistance. Instead, assistance eligible individuals do not have to pay any COBRA premiums for the period of coverage from April 1, 2021 through September 30, 2021. The premium is reimbursed directly to the employer, plan administrator, or insurance company through a COBRA premium assistance credit.
[Related Reading: COBRA’s Interaction With HSAs, HRAs and FSAs]
Does the ARPA impose any new notice requirements?
Yes, plans and issuers are required to notify qualified beneficiaries regarding the premium assistance and other information about their rights under the ARPA. Each model notice is designed for a particular group of qualified beneficiaries. When provided in combination with the supplemental disclosures, DOL’s model documents contain all of the information needed by plans and issuers to satisfy the content requirements for the ARPA’s notice provisions listed below.
- A general notice to all qualified beneficiaries who have a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021 through September 30, 2021. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
- An alternative notice for group health plan issuers not subject to COBRA but are subject to state continuation coverage laws similar to COBRA, including those that apply to health insurers of employers with less than 20 employees (mini-COBRA).
- A notice of the extended COBRA election period to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation coverage election were in effect) who had a qualifying event before April 1, 2021. This requirement does not include those individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (generally, those with applicable qualifying events before October 1, 2019). This notice must be provided within 60 days following April 1, 2021 (that is, by May 31, 2021).
- Three supplemental disclosures that are combined in one model document: Summary of the COBRA Premium Assistance Provisions Under the ARPA With Supplemental Disclosures.
- Includes a summary of the ARPA’s premium assistance provisions.
- Includes the form that a participant uses to request for treatment as an assistance eligible individual
- Includes the form that a participant uses to notify the plan that you are eligible for other group health plan coverage or Medicare and therefore not eligible for premium assistance under the ARPA.
- A notice of expiration of periods of premium assistance explaining that the premium assistance for the individual will expire soon, the date of the expiration and that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan. Coverage may also be available through Medicaid or the Health Insurance Marketplace®. This notice must be provided 15-45 days before the individual’s premium assistance expires.
Go to DOL’s COBRA Premium Subsidy dedicated page for Microsoft Word versions of model notices.
What are the penalties for noncompliance?
Employers or multiemployer plans that don’t satisfy COBRA continuation coverage requirements may be investigated by the DOL and subject to an excise tax. This tax could be as much as $100 per qualified beneficiary but not more than $200 per family for each day that the taxpayer is in violation of the COBRA rules.
If you [a worker] elect COBRA continuation coverage with premium assistance and then become eligible for other group health plan coverage (not including coverage that is only excepted benefits such as dental or vision coverage, a Qualified Small Employer Health Reimbursement Arrangement or a health care flexible spending arrangement), or if you become eligible for Medicare, you MUST notify the plan in writing. If you fail to provide this notice, you may be subject to a penalty of $250 (or if the failure is fraudulent, the greater of $250 or 110% of the premium assistance provided after termination of eligibility). You won’t be subject to the penalty if your failure to notify the plan is due to reasonable cause and not due to willful neglect.
What’s next?
Group health plans, health insurers or COBRA service providers must prepare and distribute the notices described above. Group health plan sponsors still expect further DOL guidance on COBRA subsidy eligibility, such as what involuntary termination of employment means and how plans will receive the tax credit subsidy. We will be watching for any guidance specific to multiemployer plans. You can find any updates to these topics on our Coronavirus Resources webpage.
Additional Resources
- You’ve Sent the COBRA Special Extended Election Period Notices – What’s Next? [Proskauer]
- DOL Releases Model COBRA Subsidy Notices and Forms [Mercer]
- Issues Model COBRA Subsidy Notices and FAQs [Mintz]
[Learn more about how the American Rescue Plan Act (ARPA) is impacting employee benefits.]
Jenny Lucey, CEBS
Manager, Reference/Research Services at the International Foundation
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