Continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain continuation coverage rights for participants and beneficiaries covered by a group health plan. Generally, an individual covered by a group health plan on the day before the occurrence of a qualifying event causing loss of coverage (i.e., termination of employment or a reduction in hours) may be able to elect COBRA continuation coverage upon such an event.
The American Rescue Plan Act of 2021 (“ARP”), which was signed into law by President Biden on March 11, 2021, provides for temporary premium assistance for COBRA continuation coverage. These COBRA premium assistance provisions include a 100% COBRA subsidy for “Assistance Eligible Individuals” for up to six (6) months—from April 1, 2021 through September 30, 2021. In other words, no premiums for COBRA continuation coverage may be collected from Assistance Eligible Individuals during this period.
The employer/plan sponsor is responsible for paying the COBRA premiums for the Assistance Eligible Individuals, with the premiums recoverable through the employer/plan sponsor’s payroll tax credits when filing quarterly Federal Insurance Contributions Act (FICA) tax returns.
As stated by the U.S. Department of Labor (DOL) in its April 7, 2021 FAQ guidance regarding the ARP’s COBRA premium assistance provisions, the COBRA premium assistance provisions apply to all group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules under the Employee Retirement Income Security Act of 1974 (ERISA), as well as plans sponsored by State or local governments subject to the continuation provisions under the Public Health Service Act.
Assistance Eligible Individual
Under the ARP, an “Assistance Eligible Individual” is an individual who meets the following two (2) requirements during the period from April 1, 2021 through September 30, 2021:
- is eligible for COBRA continuation coverage due to the termination other than by reason of such employee’s gross misconduct (also referred to as “involuntary termination”) or reduction of hours of the covered employee’s employment; and
- elects COBRA continuation coverage.
Additional Election Opportunity
As clarified by the DOL, a qualified beneficiary whose qualifying event was an involuntary termination prior to April 1, 2021, and either (a) did not elect COBRA coverage when it was first offered before April 1, 2021, or (b) elected COBRA continuation coverage but is no longer enrolled (e.g., dropped from COBRA coverage due to failure to continue paying premium), may still have an additional election opportunity at this time.
Individuals eligible for this additional COBRA election opportunity must receive a notice of extended COBRA election period by May 31, 2021, and such individuals have 60 days thereafter to elect COBRA. However, this additional election period does not extend the period of COBRA continuation coverage beyond the original maximum period (i.e., beyond the typical 18 months).
COBRA continuation coverage with premium assistance elected in this additional election period begins with the first period of coverage beginning on or after April 1, 2021. An individual can begin coverage prospectively from the date of election, or, if the individual has a qualifying event on or before April 1, can choose to start coverage as of April 1, even if the individual receives an election notice and makes such election at a later date. In either case, premium assistance is only available for periods of coverage from April 1, 2021 through September 30, 2021.
Because the ARP’s COBRA premium assistance applies only to premiums for coverage periods from April 1, 2021 through September 30, 2021, individuals who have already been enrolled in COBRA continuation coverage prior to April 1, 2021, and have consequently been paying premiums, are not entitled to refunds of these pre-April 1st premiums. If, however, eligible individuals paid premiums for COBRA coverage between April 1, 2021 through September 30, 2021, the DOL advises such individuals to contact the plan administrator or employer sponsoring the plan to discuss a credit towards future payments (or a refund in certain circumstances).
Cessation of Premium Assistance
An Assistance Eligible Individual will no longer be eligible for the COBRA subsidy if:
- The individual becomes eligible for coverage under any other group health plan (e.g., through a new employer’s or a spouse’s plan), health flexible spending arrangement, qualified small employer health reimbursement arrangement, or Medicare; or
- The individual reaches the end of the maximum COBRA continuation coverage period.
Plans and issuers are required to notify qualified beneficiaries regarding the premium assistance and other information about their rights under the ARP, as follows:
- A general notice to all qualified beneficiaries who have a qualifying event 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.
- 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 (by May 31, 2021).
Plans and issuers must also provide individuals with a notice of expiration of periods of premium assistance, indicating that the premium assistance 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 marketplace. This notice must be provided 15 to 45 days before the individual’s premium assistance expires.
Unless specifically modified by the ARP, the existing requirements for the manner and timing of COBRA notices continue to apply. Due to COVID-19, the DOL, the Department of the Treasury, and the IRS issued guidance extending timeframes for certain actions related to health coverage under private-sector employment-based group health plans. The extensions under the Joint Notice and EBSA Disaster Relief Notice 2021-01 do not apply, however, the election periods or notices related to COBRA premium assistance are available under the ARP. As such, plans and issuers must provide the notices according to the timeframes specified in the ARP, as outlined above.
Notices must include the following items:
- The forms necessary for establishing eligibility for the premium assistance;
- Contact information for the plan administrator or other person maintaining relevant information in connection with the premium assistance;
- A description of the additional election period (if applicable to the individual);
- A description of the requirement that the Assistance Eligible Individual notify the plan when he/she becomes eligible for coverage under another group health plan (not including excepted benefits, a QSEHRA, or a health FSA), or eligible for Medicare and the penalty for failing to do so
- A description of the right to receive the premium assistance and the conditions for entitlement; and
- If offered by the employer, a description of the option to enroll in a different coverage option available under the plan.
For more information, including the model notices developed and published by the DOL, please visit the following link: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy.