DOL Issues COBRA Subsidy Guidance
Director of Employee Benefits Compliance
On April 7, 2021 the Department of Labor (DOL) issued further guidance on the COBRA premium subsidies required under the American Rescue Plan Act (ARPA). The additional guidance includes FAQs and Model Notices on a dedicated DOL website page. Important clarifications regarding the COBRA premium subsidy are outlined below.
Application: 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 Public Health Services Act and group health insurance required under state mini-COBRA laws.
There is no employer size requirement or limit. “Group Health Plans” include standalone dental and vision plans subject to COBRA or state continuation.
Assistance Eligible Individuals:
Assistance Eligible Individuals (AEIs) are COBRA qualified beneficiaries (including family members) who meet the following requirements during the timeframe of April 1, 2021 – September 30, 2021:
- Eligible for COBRA by reason of a Qualifying Event that is:
- A reduction in hours (reduced hours due to change in a business’s hours of operations, a change from FT to PT status, taking of a temporary leave of absence, or an individual’s participation in a lawful labor strike, as long as the individual remains an employee at that time that the hours are reduced), or
- An involuntary termination of employment. This does NOT include a voluntary termination of employment.
- Elects COBRA (either previously or as a result of the extended subsidy election period)
An AEI is NOT eligible for premium assistance if eligible for other group health coverage, such as through a new employer’s plan or a spouse’s plan (not including excepted benefits, a QSEHRA or FSA) or eligible for Medicare.
If an AEI elects to enroll in COBRA with premium assistance, then the individual would no longer be eligible for premium tax credits or health insurance tax credit for health coverage on Marketplace during that time.
If the termination was for gross misconduct, the employee and any dependents would NOT qualify.
Premium Assistance time period: April 1, 2021 – September 30, 2021.
Coverage may terminate early if maximum COBRA period is reached or an individual becomes eligible for another group health plan or Medicare during that time.
Individuals must notify the plan or plan administrator if they become eligible for another group health plan or Medicare. Failure to do so may result in tax penalties for the individual.
COBRA Premium Assistance Election:
A COBRA qualified beneficiary whose COBRA qualifying event was before April 1, 2021 and who did not elect COBRA continuation when first offered OR who elected but is no longer enrolled may have an additional election opportunity. These individuals must be provided with a notice to elect the COBRA with premium subsidy. This notice must be provided within 60 days for the first day of the month beginning of the enactment of the ARP: May 31, 2021.
Individuals have 60 days to elect once they are notified of their eligibility. Individuals may:
- Begin coverage prospectively from the date of election, OR
- Choose to start their coverage as of April 1, 2021 if the individual had a COBRA Qualifying Event prior to April 1, 2021 even if an individual receives an election notice and makes the election at a later date.
Family members that did not originally elect COBRA and were COBRA Qualified Beneficiaries can elect premium assistance COBRA if the original COBRA Qualifying Event was involuntary termination or a reduction in hours of the employee.
IMPORTANT: The COBRA extended deadlines under previous guidance do NOT apply to deadlines under the ARPA COBRA Premium Subsidy requirements.
Premium Payments during Subsidy Period:
Plans and issuers should NOT collect premium payments from AEIs and subsequently require them to seek reimbursement of premiums for periods of coverage beginning on or after April 1, 2021 and preceding the date on which an employer sends an election notice.
AEIs do not have to pay any part of what the person would otherwise pay for COBRA, including any administration fees that would otherwise be charged during the subsidy period.
Model notices are available here: https://www.dol.gov/cobra-subsidy
- General Notice to all COBRA qualified beneficiaries who have a COBRA qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021 through September 30, 2021. Notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
- Notice of the extended COBRA election period to any AEI who had a COBRA Qualifying Event before April 1, 2021. This does NOT include any individuals whose maximum COBRA continuation period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (those with QEs before October 1, 2019). This notice must be provided within 60 days following April 1 (May 31, 2021).
- Notice of the expiration of COBRA premium assistance must be given 15-45 days before premium assistance expires.
Employer penalty for noncompliance with notice requirements: $100 per Qualified Beneficiary, no more than $200 per family, for each day of violation.
Different coverage option:
Employer-sponsored health plans can CHOOSE to allow qualified beneficiaries to enroll in coverage that is different from the coverage they had at the time of the COBRA Qualifying Event IF:
- The COBRA premium charged for different coverage is the same or lower than the coverage the individual had at the time of the Qualifying Event;
- Different coverage is also offered to similarly situated active employees; AND
- Different coverage is not limited to excepted benefits, a QSEHRA or health FSA
If a plan sponsor permits change, the plan must provide a notice of the opportunity to do so. Individuals have 90 days to elect to change their coverage after the notice is provided.
Any individuals on Marketplace coverage can switch to COBRA with premium assistance, however Marketplace coverage can only be terminated proactively. When COBRA premium assistance ends, individuals may be eligible for a special enrollment period in the Marketplace or other individual coverage.
Employers who sponsor group health plans would be well-served to review these required COBRA subsidy updates from the Department of Labor. Plan sponsors should work with their health insurance carrier or third party administrator to make sure they are complying these new requirements.
If you have specific questions or concerns, please reach out to your M3 account team.