On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act of 2021 (the “ARPA”). Designed to provide various forms of financial assistance related to the impact of COVID-19 across the country, ARPA also made some significant although temporary changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) as summarized herein.
The ARPA provides for COBRA premium assistance to help “assistance eligible individuals”, as defined below, continue their health care benefits. Specifically, “assistance eligible individuals” are not required to pay their COBRA continuation coverage premiums (including any related administrative charges) for periods of health coverage on or after April 1, 2021, through September 30, 2021. Note that this premium assistance also is available for continuation coverage under certain comparable state continuation coverage laws. The costs of such coverage incurred by affected employers or plans are defrayed via tax credits for the amount of the premium assistance. The United States Department of Labor (the “DOL”) has issued guidance on the COBRA provisions contained in the ARPA.
As noted above, the COBRA premium assistance under the ARPA is available to “assistance eligible individuals”, which includes any COBRA qualified beneficiary who meets the following requirements during the period from April 1, 2021, through September 30, 2021: (a) the beneficiary is eligible for COBRA continuation coverage by reason of a reduction in hours or an involuntary termination of employment; and (b) the beneficiary elects COBRA continuation coverage. In the event that an employee’s termination of employment is for gross misconduct, neither the employee nor any of his/her dependents would qualify for COBRA continuation coverage or the temporary premium assistance. Generally, the premium assistance period can last from April 1, 2021 through September 30, 2021, provided that the assistance ceases if the beneficiary becomes eligible for another group health plan or for Medicare or reaches the end of his/her maximum COBRA continuation coverage period. ARPA does not affect the required period of continued coverage available under COBRA or under any state continuation coverage law. Persons receiving the COBRA premium assistance generally must notify their plans if they become eligible for coverage under another group health plan or under Medicare. Any failure to do so can result in the imposition of a tax penalty.
A somewhat unusual “second-bite-of-the-apple” rule applies under the ARPA. A beneficiary who (1) was offered COBRA continuation coverage as a result of a reduction in hours or an involuntary termination of employment prior to April 1, 2021, but declined such coverage or (2) elected such continuation coverage as a result of a reduction in hours or an involuntary termination prior to April 1, 2021, but later discontinued it has another opportunity to elect COBRA continuation coverage and receive the premium assistance. The second opportunity is available only if the beneficiary’s maximum period of COBRA continuation coverage has not yet expired (i.e., generally beneficiaries with applicable qualifying events on or after October 1, 2019). Beneficiaries eligible for this additional COBRA election period are entitled to receive a notice of extended COBRA election period informing them of this “second-bite-of-the-apple” opportunity. Under the ARPA, this notice must be provided by May 31, 2021. Beneficiaries receiving this notice have 60 days after receipt of the notice to elect COBRA. In this event, the COBRA continuation coverage with premium assistance elected in this additional election period would begin with the first period of coverage beginning on or after April 1, 2021. Of course, the premium assistance is only available for periods of coverage from April 1, 2021, through September 30, 2021.
Plans are required to notify qualified beneficiaries regarding the premium assistance and other information about their rights under the ARPA. A general notice must be provided to all qualified beneficiaries who have a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021, through September 30, 2021. This notice may be provided separately or with the general COBRA election notice following a COBRA qualifying event. In addition, and as noted above, a notice of the extended COBRA election period should be provided to any beneficiary entitled to a “second-bite-of-the-apple” election.
The required ARPA notices generally must include the following information: (1) the forms necessary for establishing eligibility for the premium assistance; (2) contact information for the plan administrator in connection with the premium assistance; (3) a description of the additional election period; (4) a description of the requirement that the beneficiary notify the plan when he/she becomes eligible for coverage under another group health plan or under Medicare and the penalty for failing to do so; (5) a description of the right to receive the premium assistance and the conditions for entitlement; and (6) if offered, a description of the option to enroll in a different coverage option available under the plan. The DOL has developed model notices that can be used for these purposes, which can be found on the DOL website. The use of these model notices is not required but employers and plans will be considered in good faith compliance if they use the forms. Employers are well advised to review their existing COBRA notices and update their notification procedures as quickly as possible.
The ARPA also requires that plans provide individuals with a notice of expiration of the period of premium assistance explaining that the premium assistance for the individual will expire soon, the date of the expiration and that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan. This notice must be provided 15-45 days before the individual’s period of premium assistance expires.
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