As described in our March 15, 2021 update, the American Rescue Plan Act of 2021 (the “Act”) created a temporary, 100% subsidy for assistance-eligible individuals’ premium payments for continuation health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), harkening back to past relief subsidizing COBRA continuation coverage under the American Recovery and Reinvestment Act of 2009. On April 7, 2021 the Department of Labor released four model notices (available here) employers and plan administrators may use to comply with the additional notice requirements with respect to the subsidized COBRA continuation coverage, along with a summary of the premium assistance provisions of the Act and Frequently Asked Questions ("FAQ") about implementation of the premium assistance.
Below are some of the key points from the most recent guidance.
- Model Notices & Request Form: The Department of Labor provided four model notices as well as a form for individuals to request treatment as an Assistance Eligible Individual.
- Broad eligibility: The FAQs reiterate the expansive definition of who may qualify for the premium assistance as an “Assistance Eligible Individual.” The premium assistance is available during the period from April 1, 2021 through September 30, 2021 to COBRA qualified beneficiaries who:
- Are eligible for COBRA continuation coverage by reason of an involuntary termination of employment or a voluntary or involuntary reduction in hours (“COBRA Subsidy Qualifying Event”); and
- Elect (or have previously elected) COBRA continuation coverage.
Note that the definition of Assistance Eligible Individual is not limited to employees but also includes their dependents or other qualified beneficiaries who lost (or in the future lose) coverage as a result of a COBRA Subsidy Qualifying Event.
Importantly, the guidance does not elaborate on the concept of “involuntary termination” and therefore, leaves employers with the somewhat open question of what exactly constitutes an involuntary termination of employment for purposes of the Act.
- Additional Election Opportunity: Plan administrators will need to identify and provide notices no later than May 31, 2021 to any individuals who lost group health plan coverage as a result of a COBRA Subsidy Qualifying Event as far back as October 2019. Under the FAQs, a qualified beneficiary who lost group health plan coverage as a result of a COBRA Subsidy Qualifying Event prior to April 1, 2021 and either did not elect COBRA continuation coverage when it was first offered, or did elect COBRA continuation coverage but is no longer enrolled, may have an additional opportunity to elect COBRA continuation coverage. Thus, plan administrators cannot simply provide notices to individuals currently enrolled in COBRA continuation coverage, but must also identify and provide notices to any individual who meets the definition of an Assistance Eligible Individual under the Act.
- Extensions Under Previous Department of Labor Guidance Do Not Apply: The extensions of certain timeframes for plan sponsors and plan administrators under EBSA Disaster Relief Notice 2021-01 (“Notice 2021-01”) and joint guidance from the Department of Labor, Department of the Treasury and Internal Revenue Service requiring group health plans to disregard certain timeframes and deadlines (discussed in our March 15, 2021 update) do not apply for either plan sponsors/administrators OR Assistance Eligible Individuals. In other words, if an Assistance Eligible Individual does not return his or her election form prior to the applicable deadline, that individual is technically not eligible for the premium assistance.
- Provision of Premium Assistance: The premium assistance will be provided to individuals by effectively having employers or other coverage providers front the cost by not collecting premiums for the applicable period (including any administrative fee) and recovering those amounts through a tax credit. Notably (and although we are still waiting on specific guidance from the Internal Revenue Service regarding the tax credit), employers are allowed to take an advance on these tax credits which should (hopefully) ease some of the burden associated with fronting the costs of premiums for COBRA continuation coverage.
- When Premium Assistance Begins: The FAQs provide specific timing requirements for providing notices of the availability of premium assistance and, where an Assistance Eligible Individual had not initially elected COBRA continuation coverage or had elected such coverage but subsequently let it lapse, the second bite at the apple to elect coverage. However, while employers and plan administrators may have until May 31, 2021 to provide such notices to individuals with qualifying COBRA events prior to April 1, 2021, there may be situations where notices could be required sooner than that. Further, plans will almost certainly need to have processes and administration in place to implement the premium assistance for individuals well in advance of May 31, 2021, because the recent guidance also includes a “Request for Treatment as an Assistance Eligible Individual Form” whereby individuals may request such treatment without needing to wait for the actual notice and election materials from the plan administrator. (Presumably, even if an individual requests such advance treatment, such individual would still need to return the election forms once provided, as they include representations that the individual qualifies for the assistance and is not eligible for other disqualifying coverage.)
If you have questions or would like more detailed information, Polsinelli’s employee benefits team can assist in understanding these new notice requirements and administrative implications for COBRA continuation coverage following the Act.