DOL Releases Model Notices and FAQs Related to Full COBRA Premium Subsidies
Employers sponsoring group health plans that are subject to COBRA now have access to model notices and guidance from the Department of Labor (“DOL”) related to the full COBRA premium subsidy provisions in the American Rescue Plan Act of 2021 (“ARPA”). On April 7, 2021, the DOL released model notices and frequently asked questions (“FAQs”) related to these premium subsidies. The model notices and FAQs are available on the DOL’s website here.
ARPA requires group health plans to provide notices to individuals losing health coverage due to a reduction in hours or involuntary termination of employment to inform them of the premium subsidy that may be available. Group health plans and employers may use the model notices to comply with ARPA’s notice requirements, and to provide important information to individuals about their healthcare rights under COBRA, ARPA, and other laws.
ARPA, which became law on March 11, 2021, provided significant relief to individuals affected by the COVID-19 pandemic. Among its relief provisions are an expansion of the Affordable Care Act (“ACA”) premium tax credits, a temporary increase to the dependent care flexible spending account (“FSA”) limit, and a full COBRA premium subsidy. See our previous client alert here.
The full COBRA premium subsidy (i.e., equal to 100% of the COBRA premium) for federal and comparable state “mini-COBRA” continuation coverage generally applies for the period from April 1, 2021 through September 30, 2021, and is available to “assistance eligible individuals.” “Assistance eligible individuals” generally include any employee or dependent who loses group health plan coverage due to an involuntary termination of employment or a reduction in hours.
The DOL published the following model notices:
- Model General Notice and COBRA Continuation Coverage Election Notice. This notice may be used for any individual who loses coverage due to a qualifying event for the period from April 1, 2021 to September 30, 2021, including due to a reduction in hours or involuntary termination of employment. This notice contains important information about the individual’s rights to elect COBRA continuation coverage, as well as other health coverage options that may be available, such as coverage through Medicaid or through an ACA Marketplace.
- Model Notice in Connection with Extended Election Period. ARPA created a special election period, or “second-bite-at-the-apple,” for assistance eligible individuals who did not elect COBRA continuation coverage but who would otherwise be eligible for the COBRA subsidy. In addition, ARPA created a special election period for any individual who elected COBRA continuation coverage and discontinued such coverage before April 1, 2021. Notice of the extended election period must be provided by May 31, 2021. Since individuals may elect COBRA continuation coverage within 60 days of receiving the required employer notice of the opportunity, this election cannot be made later than July 30, 2021. This additional election period does not extend the period of COBRA continuation coverage beyond the individual’s original maximum period (generally 18 months from the individual’s reduction in hours or involuntary termination).
- Model Alternative Notice. Group health plans subject to state “mini-COBRA” continuation coverage, but not federal COBRA continuation coverage, may send the alternative notice to individuals who are eligible for continuation coverage under a state law.
- Model Notice of Expiration of Premium Assistance. ARPA provides that a notice must be provided to inform assistance eligible individuals of when their premium subsidy will expire, and this must be done no more than 45 days before and no fewer than 15 days before the expiration date. This notice does not need to be sent if the individual is losing the premium subsidy due to becoming eligible for other group health plan coverage or Medicare.
- Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021. The DOL recommends distributing this document with the model notices because it contains information on ARPA, forms to elect or discontinue the premium subsidy, and other information to satisfy the notice requirements of ARPA.
Employers and TPAs must tailor these model notices to comply with the administrative procedures and other requirements of their specific group health plans. In addition, in the case of the Model Alternative Notice, group health plans must review the notices to ensure they comply with applicable state law.
Frequently Asked Questions
The FAQs address a number of common questions about the full COBRA premium subsidies. Specifically, the guidance clarifies the following points:
- Under previous DOL guidance in EBSA Disaster Relief Notices 2020-01 and 2021-01, employee benefit plans must disregard the “outbreak period” for a period of up to one year when determining certain deadlines, such as deadlines for COBRA elections and premium payments. The outbreak period is the period from March 1, 2020 until the date that is 60 days after the President’s national emergency declaration for COVID-19 expires. The outbreak period is still ongoing.
The FAQs clarify that the extended time period under the previous DOL guidance does not apply to the 60-day notice or election periods related to the full COBRA premium subsidies under ARPA. In other words, the 60-day notice or election periods under ARPA are not extended. With that said, the premium subsidy election period does not cut off an individual’s pre-existing right to elect COBRA continuation coverage under the extended time frame of up to one year provided for under previous DOL guidance.
- Individuals whose employment was terminated for gross misconduct are not eligible for the premium subsidy.
- The amount of the premium subsidy includes any administrative fees associated with the COBRA premium.
- Individuals may not receive refunds for any premiums paid for periods prior to April 1, 2021. If an individual has already paid their April premium in full, the party to whom the payment was made must issue a credit or refund to the individual.
- Eligibility for coverage under another group health plan, including that of a spouse’s employer, or Medicare will disqualify the assistance eligible individual from the premium subsidy.
- If an individual enrolls in COBRA continuation coverage and obtains the premium subsidy, he or she will no longer be eligible for a premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit for health coverage during that period that may have been available through the ACA Marketplace or Medicaid.
We anticipate that the DOL, Internal Revenue Service, and Department of Health and Human Services will continue to issue more guidance on questions related to the premium subsidy. In the meantime, employers may use the model notices issued by the DOL to comply with ARPA’s notice requirements and inform individuals of important information about their healthcare rights under COBRA, ARPA, and other laws.
If you have any questions, please contact one of the authors or another one of the Miller Johnson employee benefits attorneys.