Compliance Update: the American Rescue Plan Act (ARP)
As discussed in our previous compliance update, the American Rescue Plan Act (the “ARP”) was signed into law on March 11, 2011, requiring a 100% subsidy of COBRA premiums during the period of April 1, 2021, through September 30, 2021. Note: this applies to both entities subject to federal COBRA and small group health insurance plans subject to mini-COBRA (state continuation) laws.
On April 7, 2021, the Department of Labor (DOL) released the following documents:
General & Election Notice (for qualified beneficiaries with a qualifying event during the period of 4/1/2021 through 9/30/2021.
Extended Election Period-related Notice (for qualified beneficiaries that experienced a qualifying event due to an involuntary termination/reduction in hours during the period of 10/1/2019 through 3/31/2021.
The Act provides for a generous COBRA subsidy during the period of April 1, 2021, through September 30, 2021, to an “assistance eligible individual” (an “AEI”), which includes a qualified beneficiary who is eligible for COBRA coverage due to (1) an involuntary termination; (2) a loss in coverage from an involuntary reduction in working hours; or (3) prior eligibility for COBRA coverage. Most importantly, this includes qualified beneficiaries that elected COBRA coverage prior to April 1, 2021. The Act excludes premium assistance to those that experienced a termination of reduction in hours on a voluntary basis.
The Act also extends subsidies to those employees that, prior to April 1, 2021, were involuntarily terminated or experienced a reduction in working hours and were eligible for COBRA coverage, but declined to elect; and to those who had elected, but had then discontinued coverage before April 1, 2021. Enrollment for these employees begins April 1, 2021, and extends 60 days following issuance of the mandatory COBRA notice (detailed below).
The DOL’s New Guidance
The DOL’s Q&A clarified a couple of helpful points, including:
Assistance Eligible Individual: An “Assistance Eligible Individual” is an individual that is eligible for COBRA based on a qualifying event, including a reduction in hours (which may be the business reduced hours of operation, a change from full-time to part-time status, a temporary leave of absence, or participation in a lawful strike), or an involuntary termination of employment. Premium assistance extends to not only the affected employee but any qualified beneficiary under the plan, which normally includes a spouse and/or child(ren). The guidance does not clarify what “involuntary termination” is and future guidance is expected.
Other Medical Coverage: Premium assistance does not extend to individuals that are eligible for other coverage, such as group health coverage through a new employer or spouse, or Medicare eligibility, or those terminated for gross misconduct. Individuals that are eligible for coverage under another group health plan (not including excepted benefits, a QSEHRA, or FSA) or Medicare are required to notify the plan or face a tax penalty. Individuals eligible for individual coverage through the Marketplace (healthcare.gov) or Medicaid may still be eligible for COBRA premium assistance but are not eligible for premium tax credits on the exchange. Once the COBRA premium assistance period ends, the individual may be eligible for special enrollment through the exchange or Medicaid.
Subsidy Window: Since COBRA can last up to 18 months, the DOL confirms that the premium assistance subsidy could potentially apply to qualified beneficiaries with a qualifying event that occurs between October 1, 2019, and September 30, 2021. AEIs that experienced a qualifying event after April 1, 2021, can elect subsidized coverage through September 30, 2021 (and can continue afterward, at their own expense). Individuals eligible for premium assistance can elect subsidized COBRA coverage at any time during the subsidy window from April 1 – Sept. 30, 2021.
Plans Affected: The Q&A confirms that the premium assistance applies “to all group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules under ERISA,” which includes group medical (fully insured and self-insured), Rx (if separate), a Health Reimbursement Arrangement (HRA), dental, vision, and in limited situations, an EAP and wellness program. It also applies to plans sponsored by State or local governments and small group health insurance plans subject to mini-COBRA (state continuation) laws.
As to notices, the Q&A confirms: “Individuals eligible for this additional COBRA election period must receive notice of extended COBRA election period informing them of this opportunity. This notice must be provided within 60 days of the first day of the first month beginning after the date of the enactment of the ARP (so, by May 31, 2021) and individuals have 60 days after the notice is provided to elect COBRA.” Often, the group’s COBRA administrator will handle this task (and the group should confirm with the administrator), but the group may need to provide contact information for former employees eligible for the subsidy.