Read More

Department of Labor (DOL) Update on the New COBRA Premium Subsidies

On April 7, 2021, the DOL released an update addressing the most frequent questions plan participants have regarding the new COBRA premium subsidies, a part of the American Rescue Plan Act (ARPA) of 2021, passed March 11, 2021.

These subsidies are available to certain individuals who are on COBRA* or state continuation* for the period of April 1, 2021, through September 30, 2021. Our 3/17/21 post, Employers’ Top COBRA Subsidy Questions Under the American Rescue Plan Act of 2021, clarifies eligibility requirements and employer obligations.

This new FAQ fills in some of the missing components for employers as they work to administer this new provision. Specifically, it provides the following clarifications and resources:

  1. Eligibility for The Premium Subsidy Under State Continuation

    • ARPA does not change any requirement of a State continuation program
    • Individuals currently covered under, or become eligible and enroll in, state continuation, on or after April 1, 2021, may apply for the premium subsidy.
    • Unlike those on COBRA, individuals who did not previously elect state continuation when first eligible do not have the opportunity to apply for continuation at a later date, unless their state expressly authorizes allowing such an action. To date, we are not aware of any states that allow a late enrollment to coincide with this new premium assistance law.
  2. Premium Assistance Payments

    • Eligible Assistance Eligible Individuals (AEIs) pay no premium for the coverage period of April 1, 2021, through September 30, 2021
    • Employers, plan administrators, and insurance companies pay the premium and then receive the premium subsidy as a credit
  3. Notices and Elections

    • Plans and issuers are required to notify qualified beneficiaries regarding premium assistance and other information about their rights under ARPA
    • The COBRA General Notice can incorporate these requirements, or this information can be provided separately
    • Notice of Extended COBRA Election Period must be provided within 60 days following April 1, 2021 (by May 31, 2021)
    • Unless specifically modified by ARPA, no change to the manner and timing of COBRA notices
    • New model notices provide additional language to address premium assistance election and eligibility
      • Model General Notice and COBRA Continuation Coverage Election Notice
        (for those with qualifying events occurring April 1, 2021 – September 30, 2021): MS Word | PDF
      • Model Notice in Connection with Extended Election Period
        (for those AEIs currently enrolled in COBRA due to a reduction in hours or involuntary termination or who would be AEIs if they had elected or continued COBRA- must be sent by May 31, 2021 to affected individuals): MS Word | PDF
      • Model Alternative Notice
        (for insured coverage subject to state continuation): MS Word | PDF
      • Model Notice of Expiration of Premium Assistance
        (for AEIs to use 15-45 days before premium assistance expires): MS Word | PDF
      • Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021
        (describes premium assistance to participants and contains the application to apply for the premium subsidy): MS Word | PDF

Employers should take the following steps to comply with the new law:

  1. Determine which individuals are eligible for premium assistance and send model notice b. or c. above
  2. Employers subject to COBRA should replace their current COBRA notice with the new temporary model notice a. for the period of April 1, 2021, through September 30, 2021
  3. Watch for subsequent information from the IRS that clarifies the rules and process when claiming the premium assistance credit

For the most current information, tune in to our Health Care Happenings podcast to hear our take on the newest developments.