COBRA Changes, April 2021
The ARPA COBRA Subsidy
New Model COBRA Notices have not yet been issued by the DOL. They should be issued within the next few weeks. Check this page frequently for more updates.
The Rescue Plan includes a 100% COBRA premium subsidy that will apply for a coverage period running from April 1, 2021, through September 30, 2021.
Eligible qualified beneficiaries could receive up to 6 months of subsidized coverage, although the period may be shorter if the qualified beneficiary’s COBRA continuation coverage period ends or if the person becomes eligible for any other group health plan coverage, including Medicare (regardless of whether the person declines that new coverage).
Under the Rescue Plan, the subsidy applies to “assistance eligible individuals.” Such individuals are those who, during the Subsidy Term, are eligible for COBRA continuation coverage because of a qualifying event that was either an involuntary termination of employment or a reduction in hours.
The subsidy appears to be available to all assistance-eligible individuals who
(1) become eligible during the Subsidy Term,
(2) are currently enrolled in COBRA coverage and will remain enrolled during some or all of the Subsidy Term,
(3) failed to elect COBRA coverage (but who would otherwise be in in their COBRA continuation window during the Subsidy Term if they had elected coverage),
(4) elected COBRA but subsequently dropped coverage (but who would otherwise be in in their COBRA continuation window during the Subsidy Term if they had not discontinued coverage). Assistance-eligible individuals in the latter two categories are also entitled to a special enrollment period described below.
Special Election Period
Effective as of April 1, 2021, assistance-eligible individuals who do not have a COBRA election in effect or who originally elected COBRA but discontinued COBRA coverage (as described in categories 3 and 4 in the previous paragraph) will have a special opportunity to elect coverage.
These individuals may make a special election within 60 days of their receipt of a required notice informing them of their eligibility (as described below).
As noted earlier, the Rescue Plan creates several new notice requirements. First, employers and plans must provide a general notice of subsidy availability to all assistance-eligible individuals. This general notice should also include a statement regarding the option to make a plan enrollment change (if the plan permits this). Individuals who are eligible for the special 60-day election period must receive a notice about the special election period by May 31, 2020.
Employers and plans must also provide a subsidy expiration notice within 45 to 15 days prior to the expiration of a subsidy. The Rescue Plan requires that the notices include specific content but provides that employers may either modify existing notices, add inserts to existing material or rely on the applicable model notices that will be issued by the DOL within 30 days of enactment.
Employee Responsibility to Notify Employer
Notably, the Rescue Plan requires assistance-eligible individuals to notify their COBRA group health plan administrator if they become eligible for separate coverage. Failure to do so could result in a $250 penalty per failure, and the penalty could be higher for an intentional or fraudulent failure to notify the plan. We expect that the DOL will provide additional guidance detailing communication obligations and specific penalty criteria for assistance-eligible individuals.
Assistance-eligible individuals will not pay the COBRA premium. Instead, employers and insurers will pay the premium and will receive a refundable Medicare payroll tax credit. The quarterly credit may also be advanced, in accordance with forms and instructions to be released by the DOL. We expect additional guidance regarding the mechanics tied to premium payment and the credit.
What employer should do now.
Employer should begin identifying individuals who are eligible for the subsidy, including those individuals who are eligible for a special enrollment opportunity as well as individuals who lost coverage due to an involuntary termination of employment or reduction in hours.
New notices will be posted when they are released by the DOL.
Bookmark this page and check back for updates. The new DOL notices will be posted when they are released by the DOL.
COVID-19 And COBRA
On March 13, 2020, President Trump issued the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak.
As a result, Agencies are extending certain timeframes otherwise applicable to group health plans, disability and other welfare plans, pension plans, and their participants and beneficiaries under ERISA.
The Outbreak Period currently runs from March 1, 2020 until 60 days after the announced end of the COVID‑19 Emergency) is disregarded for the purposes of COBRA payments and COBRA elections. See examples below. The outbreak period is subject to change.
With respect to group health plans, and their sponsors and administrators, the Outbreak Period shall be disregarded when determining the date for providing a COBRA election notice under ERISA section 606(c) and Code section 4980B(f)(6)(D).
COBRA election and payment timeline.
The COBRA continuation coverage provisions generally provide a qualified beneficiary a period of at least 60 days to elect COBRA continuation coverage under a group health plan.
Plans are required to allow payment of premiums in monthly installments, and plans cannot require payment of premiums before 45 days after the day of the initial COBRA election.
Plans must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency or such date announced by the Agencies in a future notification (the “Outbreak Period”) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the following periods and dates—
This has the effect of extending both election periods and COBRA premium due dates.
Example: COBRA election period extension.
Example 1 Individual A works for Employer X and participates in X’s group health plan. Due to the National Emergency, Individual A experiences a qualifying event for COBRA purposes as a result of a reduction of hours below the hours necessary to meet the group health plan’s eligibility requirements and has no other coverage.
Individual A is provided a COBRA election notice on April 1, 2020. What is the deadline for A to elect COBRA?
Individual A is eligible to elect COBRA coverage under Employer X’s plan. The Outbreak Period is disregarded for purposes of determining Individual A’s COBRA election period. The last day of Individual A’s COBRA election period is 60 days after June 29, 2020, which is August 28, 2020.
In other words, the 60 day election "clock" doesn't begin ticking until then end of the Outbreak Period.
Example: COBRA premium payment.
Example 2. On March 1, 2020, Individual C was receiving COBRA continuation coverage under a group health plan.
More than 45 days had passed since Individual C had elected COBRA. Monthly premium payments are due by the first of the month. The plan does not permit qualified beneficiaries longer than the statutory 30-day grace period for making premium payments.
Individual C made a timely February payment, but did not make the March payment or any subsequent payments during the Outbreak Period. As of July 1, Individual C has made no premium payments for March, April, May, or June.
Does Individual C lose COBRA coverage, and if so for which month(s)?
In this Example, the individual does not lose COBRA coverage. Since the Outbreak Period is disregarded when determining whether monthly COBRA are timely, payments made by 30 days after June 29, 2020, which is July 29, 2020, for March, April, May, and June 2020, are timely, and Individual C is entitled to COBRA continuation coverage for these months if she timely makes payment.
Under the terms of the COBRA statute, premium payments are timely if made within 30 days from the date they are first due. In calculating the 30-day period, however, the Outbreak Period is disregarded, and payments for March, April, May, and June are all deemed to be timely if they are made within 30 days after the end of the Outbreak Period. Accordingly, premium payments for four months (i.e., March, April, May, and June) are all due by July 29, 2020. Individual C is eligible to receive coverage under the terms of the plan during this interim period even though some or all of Individual C’s premium payments may not be received until July 29, 2020. Since the due dates for Individual C’s 13 premiums would be postponed and Individual C’s payment for premiums would be retroactive during the initial COBRA election period, Individual C’s insurer or plan may not deny coverage, and may make retroactive payments for benefits and services received by the participant during this time.
Example: Same facts as previous example. By July 29, 2020, Individual C made a payment equal to two months’ premiums. For how long does Individual C have COBRA continuation coverage?
Individual C is entitled to COBRA continuation coverage for March and April of 2020, the two months for which timely premium payments were made, and Individual C is not entitled to COBRA continuation coverage for any month after April 2020. Benefits and services provided by the group health plan (e.g., doctors’ visits or filled prescriptions) that occurred on or before April 30, 2020 would be covered under the terms of the plan. The plan would not be obligated to cover benefits or services that occurred after April 2020.