Under the American Rescue Plan Act of 2021 (ARPA), which was passed by Congress on March 11, 2021, the cost of health insurance coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) is fully subsidized from April 1, 2021 until September 30, 2021 for individuals who lost their health coverage due to an involuntarily termination or a reduction in hours. The ARPA requires employers to notify eligible individuals about the new COBRA subsidy by May 31, 2021. Eligible individuals who did not previously elect COBRA, and those who elected COBRA but stopped paying the premiums, must also be given a second election to participate. Click here to read a prior blog post by Paolo Pasicolan with more information about the COBRA subsidy under the ARPA.
On April 7, 2021, the Department of Labor (DOL) issued FAQs and model notices that group health plans may use to satisfy the federal COBRA premium subsidy notice requirements. Under COBRA, an individual who was covered by a group health plan on the day before the occurrence of a qualifying event (such as a termination of employment or a reduction in hours that causes loss of coverage under the plan) may be able to elect COBRA continuation coverage upon that qualifying event. Additionally, COBRA requires group health plans to provide covered employees and their families with certain notices explaining their COBRA rights, including a written notice of COBRA rights “at the time of commencement of coverage” under the plan (general notice) and a notice which describes their rights to COBRA continuation coverage and how to make an election (election notice).
The ARPA imposes two new additional notice requirements as well. Specifically, plans and issuers are required to provide the following notice to qualified beneficiaries regarding the premium assistance and other information about their rights:
- A general notice 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 COBRA election notice following a COBRA qualifying event.
- A notice of the extended COBRA election period to any Assistance Eligible Individual (or any individual who would be an Assistance Eligible Individual if a COBRA continuation coverage election were in effect) who had a qualifying event before April 1, 2021. This requirement does not include those individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (generally, those with applicable qualifying events before October 1, 2019). This notice must be provided within 60 days following April 1, 2021 (that is, by May 31, 2021).
- A notice of expiration of periods 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 premium assistance expires.
The model notices issued by the DOL on April 7 may be used immediately and, if completed properly, will satisfy ARPA’s premium subsidy notice requirements. The individual model notices issued on April 7 include:
- Model General Notice and COBRA Continuation Coverage Election Notice – This notice should be used by group health plans for qualified beneficiaries who have qualifying events occurring from April 1, 2021 through September 30, 2021.
- Model Notice in Connection with Extended Election Period – This notice should be used by group health plans for qualified beneficiaries currently enrolled in COBRA continuation coverage, due to a reduction in hours or involuntary termination (Assistance Eligible Individuals), as well as those who would currently be Assistance Eligible Individuals if they had elected and/or maintained COBRA continuation coverage.
- Model Alternative Notice – This notice should be used by insured coverage subject to state continuation requirements between April 1, 2021 and September 30, 2021.
- Model Notice of Expiration of Premium Assistance – This notice should be used by group health plans to Assistance Eligible Individuals 15-45 days before their premium assistance expires.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.