On April 7, 2021, the DOL issued guidance regarding the COBRA subsidy provisions under the American Rescue Plan Act of 2021 (ARPA).
As a reminder, the ARPA allows for certain individuals to elect COBRA coverage and have that COBRA coverage 100% subsidized by the federal government from April 1, 2021, to September 30, 2021. An individual must have experienced a reduction of hours or termination of their employment (other than by reason of such employee’s gross misconduct), in order to apply this subsidy. A person who voluntarily terminates their employment is not eligible for this subsidy. The DOL’s guidance includes a series of FAQs, model notices and related information.
We will thoroughly analyze the guidance in the coming days, but the guidance clarifies the following concepts:
- Premium subsidy provisions apply to all group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules. They also apply to plans sponsored by state or local governments subject to the continuation provisions under the Public Health Service Act. Premium subsidies are also available for group health insurance required under state mini-COBRA laws. Generally, premium subsidies are not available for church plans. (FAQ#2)
- An individual appears to qualify for premium subsidies if they experience a reduction of hours, regardless of whether such a reduction is voluntary or involuntary. Examples of a “reduction of hours” include any temporary leaves of absence and an individual’s participation in a lawful labor strike, and appears to include medical leave that does not result in the termination of the individual’s employment. (FAQ#3)
- If an individual is eligible through a spouse’s plan, then they are not eligible for the premium subsidy. (FAQ#3)
- An individual is eligible for a subsidy if they are on Medicaid or a marketplace/exchange plan. (FAQ#3 & FAQ#20)
- Those who enroll in COBRA continuation with premium assistance will not be eligible for a premium tax credit on the exchange. (FAQ#3)
- Individuals may have a special enrollment period during which they can enroll in coverage on the exchange after the subsidy ends. (FAQ#4)
- Individuals can choose to start their coverage as of April 1, 2021, even if they have not received an election notice at that time. Individuals could choose to have prospective coverage from the date of election or, if they have a qualifying event on or before April 1, retroactive coverage to April 1. (FAQ#5)
- 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) do not qualify for the subsidy. (FAQ#10)
- Regular rules regarding COBRA notice distribution apply, including distribution by email. (FAQ#10)
- Individuals who qualify for the premium subsidies have 60 days from receipt of the notice to elect COBRA or they forfeit their right to elect COBRA subsidies. (FAQ#13)
- Individuals who qualify for subsidies have an opportunity to elect COBRA, even if they had initially declined COBRA coverage when it was first offered, provided that they have not reached the end of the maximum period of COBRA coverage. (FAQ#5 and FAQ#10).
- Qualified beneficiaries who didn’t independently elect may do so now. (FAQ#16)
- Individuals who believe that they qualify for premium assistance need to complete and submit a form entitled “Request for Treatment as an Assistance Eligible Individual” as well as an election form. Both forms are available through the link to model notices below, as part of the Summary of COBRA Premium Assistance Provisions.
- Employers who violate COBRA rules (including the requirement to offer a COBRA election and subsidies under the ARPA) could be subject to penalties equal to $100 per qualified beneficiary or $200 per family for every day that the employer violates COBRA rules. If individuals believe that they have not received an offer of COBRA due to them, then they are advised to contact the DOL. (FAQ#10 & FAQ#21)
- Frequently Asked Questions: Benefits Compliance & the American Rescue Plan Act of 2021
- DOL COBRA Premium Subsidy Webpage (including model notices)
- DOL FAQs
Our Benefits Compliance team will continue to analyze subsequent guidance and provide resources to explain the continued developments. This guidance will also be discussed in an article in the upcoming edition of Compliance Corner, which you can expect to see posted next week.
Our ARPA webinar series continues with a third installment next Wednesday, April 14, 2021. You can register for that webinar here.
Mark Bailey, Jr. is the Senior Marketing Manager of NFP's Atlantic region. Before joining the company, Mark was a production assistant on the tv show Glee and an on-air talent on 95.1 WAPE. He has over 10 years of experience in the insurance and corporate benefits space. Mark is an avid Jacksonville Jaguars fan and loves to spend his free time building custom mechanical keyboards.