COBRA Subsidy Overview:
For a limited period, the ARPA requires employers to cover 100% of the cost of continuing group health coverage under COBRA for up to six months for “assistance eligible individuals” or “AEIs”. An AEI is a current or former employee who has lost coverage under their employer’s health care plan due to a reduction in hours or involuntary termination (for reasons other than gross misconduct). This will effectively allow AEIs (and their spouses and dependent children) to continue employer-sponsored health insurance coverage without having to contribute towards the premium costs through September 2021. Individuals who voluntarily terminated their employment are not eligible, and all other COBRA Qualifying Events do not quality for ARPA’s COBRA subsidy.
What Employers Need to Know:
- Employers will need to identify their AEIs. AEIs are employees or former employees who lost health plan coverage within the past 18 months (on or after November 1, 2019), because of an involuntary termination of employment or reduction in hours.
- AEIs and family members who currently have COBRA coverage will be eligible for a 100 percent subsidy of their premiums for up to six months (through September 30, 2021). The employer, insurer, or multiemployer plan sponsor will offset the cost by claiming a credit against Social Security and Medicare payroll taxes.
- AEIs and family members who lost coverage because of involuntary termination or reduction in hours after November 1, 2019, but who either did not elect COBRA or let their COBRA lapse, will have until 60 days after receipt of the notice to elect COBRA beginning April 1st. Any election for these participants would be prospective only, and not retroactive to the date coverage was lost. It is unclear whether these election deadlines will supersede the previous Department of Labor extension for COBRA elections.
- Employers will need to send the below notices to each of these AEIs (and their covered family members) within 60 days after April 1, 2021. The Department of Labor is supposed to issue model notices within 30 days of enactment.
– General Election Notice- Employers must provide a General Election Notice to AEIs who first become eligible for subsidized coverage between April 1st and September 30th, 2021. This notice must provide AEIs with information regarding premium assistance.
– Special Election Notice- Employer must provide a Special Election Notice to AEIs who previously elected and discontinued COBRA coverage or declined COBRA coverage between November 2019 to March 31, 2021.
– Expiration of Subsidy Notice- Employers must provide this notice to AEIs to alert them that the subsidized aspect of their COBRA coverage will expire on a certain date.This notice must be provided between 15 to 45 days before the subsidy ends.
- The ARPA subsidy does not extend COBRA coverage—coverage will still expire 18 months after coverage was lost, even if that is in the middle of the subsidy period. Apart from ARPA, coverage can be extended for a second qualifying event (up to a total of 36 months). ARPA does not address whether the subsidy will apply during that period.
- Any AEI or family member who is or becomes eligible for other group health coverage or Medicare is not eligible for the subsidy. The individual has the obligation to notify the employer if he or she is not eligible or loses eligibility.
- Employers can allow AEIs to enroll in other health plan options offered by the employer (rather than the option the AEI was enrolled in prior to the loss of coverage) if that other option is less expensive.
- The subsidy is not taxable to the COBRA beneficiary.
- There is no income cap for the subsidy.
While this subsidy goes into effect in a matter of days, there are still many questions yet to be answered. As the DOL releases model notices, regulations, and other guidance, R+R will continue to update clients on the COBRA subsidy.
If you have questions about new COBRA subsidy requirements or how it will impact your business, Contact R+R’s Director of HR Services Katie Hall at email@example.com.
Submitted by Reynolds + Rowella
of Ridgefield, CT