A COBRA subsidy program was enacted in March 2021 under the American Rescue Plan Act (ARPA), as described in Holland & Knight's previous alert (see "COBRA Premium Subsidy Under the American Rescue Plan Act," March 30, 2021). On April 7, 2021, the U.S. Department of Labor (DOL) released guidance and model notices on an information webpage regarding ARPA's COBRA subsidy program. The guidance issued by the DOL includes frequently asked questions (FAQs) as well as a summary of the key provisions of the COBRA subsidy program included in ARPA. The guidance is designed to answer questions that "assistance eligible individuals" (AEIs) may have regarding the COBRA subsidy. Specifically, the FAQs cover topics concerning eligibility, how to apply for premium assistance, how to change coverage options if permitted by an employer, timelines for enrolling, and how to obtain more information about the COBRA subsidy program.
Although the FAQs do not provide guidance regarding administrative questions being asked by many employers, such as specifics regarding the meaning of an involuntary termination of employment, the FAQs and summary will help employers begin implementation of the subsidy program.
The FAQs also provide guidance directed at individuals enrolled in Affordable Care Act (ACA) Marketplace coverage who may be an AEI and want to switch their coverage to enroll in subsidized COBRA coverage. Though this topic was not explicitly covered in ARPA, the prospect of subsidized health insurance may tempt some individuals away from their marketplace plans, notwithstanding the risk of losing their premium tax credits if and when they enroll in premium-assisted COBRA coverage.
Considerations for Employers
The model notices issued by the DOL – which include a model general notice, an extended election period notice, an alternative notice and an expiration of premium assistance notice – will be a helpful resource for employers and plan sponsors in updating their current notices as well as preparing new notification documents. Employers will need to review the notices and independently determine those employees who are AEIs entitled to an extended election period notice. Employers will also need to incorporate the new model general notice into their COBRA documentation protocol for AEIs who experience a reduction in hours of employment or an involuntary termination of employment between April 1 and Sept. 30, 2021. Employers that will allow employees to elect alternative coverage will also need to utilize the alternative notice. Employers will need to act quickly to prepare and distribute the notices as the May 31, 2021, deadline to notify affected AEIs is fast approaching.
Finally, the DOL also released a form for employees to submit to their employers or plan sponsors if they believe they are an AEI but did not receive the required COBRA premium assistance notice. Aside from the possible implications of an employer failing to properly identify AEIs and provide the requisite notice, the DOL's inclusion of this form presents additional administrative challenges and obligations for employers navigating the COBRA premium assistance program. An employer who receives the form from a former or current employee should be ready to investigate the matter and respond properly to the employee.
ARPA will continue to play an evolving role in employers' obligations and responsibilities related to COBRA coverage through 2021. Additional guidance from the IRS concerning the tax credit is expected in the near future.