End of National Emergency Related to COBRA and COBRA Subsidies
End of National Emergency related to COBRA
On February 24, 2021, the DOLreleased EBSA Disaster Relief Notice 2021-01 to clarify the duration of the COVID-19 relief providedby the original Disaster Relief Notice and regulation. There are two keyaspects of this guidance.
First, by way of background, the U.S. Department of Labor (DOL) and Department of the Treasury issued EBSA Disaster Relief Notice 2020-01 and an accompanying regulation in April 2020, which together provided extensions of certain deadlines for federal COBRA continuation coverage related to COBRA elections, premium payment, QB notices, and plan-provided election notices. The extensions were effective as of March 1, 2020, and, as outlined in the guidance, extended the various deadlines until 60 days after the COVID-19 National Emergency was declared over. However, the law under which the original guidance was issued (ERISA section 518) provided for a maximum 12-month pause of deadlines, which the original guidance did not address in any detail.
Second, the latest guidance clarifies that the extensions must be measured on an individual basis, indicating that for each individual deadline that is extended, the extension period applies to the shorter of 12 months or 60 days after the end of the COVID-19 National Emergency.
Examples of the extension periods are as follows:
- Qualified Beneficiary (QB) A had a COBRA election period that originally began on March 1, 2020, so the 60-day period to elect COBRA begins March 1, 2021. QB A has until April 29th, 2021 to elect COBRA.
- QB B had a COBRA election period that originally began on July 1, 2020, but the National Emergency ends April 1, 2021. QB B’s 60-day period to elect COBRA would begin on May 31, 2021 (end of the National Emergency + 60 days), and she would have until July 29, 2021 to elect COBRA. She would not receive the full 12-month extension because of the National Emergency end.
- QB C had a COBRA election period that originally began on February 1, 2020, and her original 60-day period to elect COBRA began on February 1, 2020. However, her election period was paused on March 1, 2020. The clock resumes on March 1, 2021, leaving her with 31 additional days to elect since 29 days had already expired prior to the beginning of the National Emergency.
ThrivePass will remove our Outbreak Period insert from new COBRA packets in March. Our notices and processes have followed, and will continue to follow, the most recent guidance.
ARPA COBRA Subsidy and Additional Enrollment Rights
On March 11, 2021 President Biden signed into law the American Rescue Plan Act of 2021 (ARPA), creating a COBRA premium subsidy and additional COBRA enrollment rights for certain employees (and their families) who have lost group health plan coverage. Key elements of ARPA include:
- COBRA Premium Subsidy: ARPA establishes a 100% COBRA premium subsidy for certain individuals during the period beginning on April 1, 2021 and ending on September 30, 2021. Eligible individuals include former employees (and their eligible dependents) who lose coverage due to an involuntary termination of employment or reduction in hours. The subsidy also applies for those individuals who already elected COBRA and are still enrolled as of April 1, 2021.
The subsidy is not available to those who are eligible or who become eligible to enroll in Medicare or another group health plan [excluding coverage consisting of only excepted benefits – which is generally standalone Dental and Vision coverage, health FSAs, and qualified small employer HRAs (QSEHRAs)] – or who have exhausted their maximum 18-month COBRA continuation period. It is unclear from the guidance whether the subsidy would apply to extended continuation periods, such as the 29-month total disability continuation period or a 36-month continuation period for a dependent qualifying event such as aging off the plan or a divorce or legal separation.
Employers (or, in some cases, the plan or insurer) will pay 100% of the COBRA premium during this period and will be reimbursed by the federal government through a credit against payroll taxes.
- Extended Election Period to obtain the subsidy: Certain individuals may elect or re-elect COBRA during an “extended election period” beginning on April 1, 2021 and ending 60 days after they are provided required notification of the extended election period.
- Individuals who do not have a COBRA election in effect on April 1, 2021, but who would still be within their COBRA continuation period if they had originally elected to continue coverage, are eligible for the subsidy. These individuals may now elect COBRA effective April 1, 2021 and receive the subsidy, with no requirement to obtain or pay for coverage back to their original effective date.
- Individuals who elected COBRA but discontinued coverage before April 1, 2021 are also eligible for the subsidy. These individuals may re-elect coverage if they would otherwise have remained eligible and are still within their maximum COBRA continuation period.
Coverage elected during the extended election period will begin with the first monthly (or shorter) period of coverage beginning on April 1, 2021 and may not extend beyond the individual’s original maximum continuation period. For example, if an individual’s COBRA effective date was November 1, 2019, he or she may elect COBRA coverage effective April 1, 2021 but will only receive coverage and the subsidy through April 30, 2021 (which would have been the end of the original 18-month continuation period).
- Plan Enrollment Options: The Act also creates a "plan enrollment option," under which a plan may (but is not required to) permit individuals to elect a different coverage option than the plan in which they were enrolled as an active employee or which they chose during their original COBRA election and receive the subsidy for the new coverage. With some exceptions, individuals who are currently enrolled in COBRA continuation coverage have up to 90 days to enroll in a different plan. The new plan cannot have a premium that exceeds the premium for the individual's existing coverage and this special plan enrollment option must also be offered to active employees.
- Notices: Group health plans must timely notify eligible individuals of the subsidy's availability and the option to enroll in different coverage (if permitted by the plan). Plan administrators must notify qualified beneficiaries who are eligible for an extended election period by May 30, 2021. In addition, plans must notify qualified beneficiaries of the end of their subsidy period between 45 and 15 days before the expiration date, unless the subsidy is expiring because the individual has become eligible for coverage under another group health plan or Medicare.
- Coordination with Health Coverage Tax Credit (HCTC): The HCTC is generally available to individuals eligible for Trade Adjustment Assistance and retirees receiving PBGC pension benefits who have lost their employer-sponsored health coverage. Effective for taxable years ending after the date of enactment, however, COBRA continuees are not eligible for the HCTC for any period of coverage in which they receive a COBRA subsidy.
The DOL is to provide model notices within 30 days of the enactment of this Act for the initial subsidy notice and within 45 days of the enactment of this Act for the expiration of subsidy notice.
Of particular note is that there has been no guidance on the interrelationship between the 12-month extension for the National Emergency and the subsidy / special enrollment period. Also of note is that the current guidance is unclear as to whether dental and/or vision plans are included in the 100% subsidy.
Additional guidance is anticipated, and we are consulting with our industry legal and compliance experts to obtain as much information as we can. We will provide updated forms and notices as soon as they are available, and we will keep you informed of any additional guidance.