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COBRA Subsidy Termination Notice

Employee Benefits

In March 2021 the American Rescue Plan Act (ARPA) was signed into law. The ARPA provided for 100% COBRA/state continuation subsidies for “Assistance Eligible Individuals” (AEIs) who are qualified beneficiaries with respect to a COBRA coverage period of April 1, 2021 and September 30, 2021 and are eligible for COBRA due to an involuntary termination of employment or a reduction in hours. 

COBRA Subsidy Eligibility

The COBRA premium subsidy applies to all group health plans sponsored by private sector employers or employee organizations (unions) subject to COBRA rules under ERISA. It also applies to plans sponsored by state and local governments subject to the continuation provisions under the Public Health Services Act and group health insurance required under state mini-COBRA laws. 

Group health plan sponsors were required to offer the subsidies to individuals that experienced the identified COBRA qualifying events prior to April 1, 2021 and were still within the maximum coverage period of 18 months as well as offer it to individuals that experienced those COBRA qualifying events after April 1, 2021. 

Requirements of Notice

Group health plan sponsors with AEIs enrolled in COBRA and receiving the subsidies are required to provide a Notice of Expiration of Premium Assistance 15-45 days prior to the expiration of the subsidy. The COBRA subsidies expire for all individuals effective September 30, 2021. Group health plan sponsors that have individuals currently enrolled and receiving the subsidy will need to provide this notice between August 16, 2021 and September 15, 2021 to meet this requirement. 

According to guidance issued in May 2021, COBRA continuation coverage automatically continues beyond the subsidy expiration date of September 30, 2021 and the payment for the first period of coverage after September 30, 2021 will be timely if paid according to the terms of the plan or coverage, subject to the applicable COBRA continuation coverage requirements taking into account the Emergency Relief deadline extensions.

The model “Notice of Expiration of Premium Assistance”, including a Spanish version, can be found here at the bottom of the webpage.

Key Takeaway: Action Required

Employers should prepare to provide the Notice of Expiration of Premium Assistance to all individuals currently receiving the COBRA subsidy between now and September 15, 2021.  Employers who outsource COBRA administration should reach out to their administrator to determine who will be providing the Notice.

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