Cobra Premium Assistance under ARP

Under Chicago train tracks
Dear Stumm Insurance clients: This is a follow up to our last quarterly “4 Point Compass” e-newsletter sent on 3/17/21, but now with clarified actions for all our clients.  As a reminder, the American Rescue Plan (ARP) Act was signed into law on 3/11/21, and one of the more significant facets of the bill was the new availability of COBRA premium assistance for certain eligible individuals referred to as AEIs (Assistance Eligible Individuals). Over the last month, there has been some clarification as to what this means for employers and actions they need to take by 5/31/21 in order to notify AEIs of their newly available COBRA premium assistance. To help summarize this aspect of the ARP and to provide direction on what you need to do next, please see below:

What Employers Need to Know

ARP’s COBRA & State Continuation premium assistance took effect as of 4/1/21, and it includes the following provisions: 
  • An assistance eligible individual (AEI) is any individual who qualifies/qualified under Federal or State Continuation due to losing coverage as a result of involuntary termination of employment or a reduction of hours.
  • Premium assistance to AEIs will be 100% of their applicable COBRA/State Continuation premium starting 4/1/21 – assistance will not apply to any COBRA premium before 4/1/21.
  • Assistance to AEIs will end upon the earliest of the following: becoming eligible for another group health plan, becoming eligible for Medicare, exhaustion of max COBRA/State Continuation period, or Sept 30, 2021.
  • AEIs who have not elected COBRA/State Continuation as of 4/1/21 can elect coverage with assistance as of 4/1/21.
  • AEIs who previously elected COBRA/State Continuation, but terminated coverage before 4/1/21, can now re-elect coverage with assistance as of 4/1/21.
  • All employers must provide a notice to AEIs by 5/31/21.
  • COBRA or State Continuation notices provided between 4/1/21 and 9/30/21 need to be revised to include language regarding the premium assistance program below.
  • COBRA premium is initially “advanced” by the employer, and then reimbursed as a credit toward the employer’s portion of their Medicare payroll tax. 

What Employers Need to Do

NOTE:  If you are currently using a third-party COBRA administrator, seek instructions directly from the administrator as to their process, their/your responsibilities, and any applicable fees they may charge as it relates to notifying your eligible AEIs.  Also see below for more context. 

For all other employers handling COBRA internally without a vendor, please see your required actions below: 

Employers will need to identify which individuals (current or former employees) had an involuntary termination, or any type of reduction of hours, that caused them to lose medical/dental/vision insurance eligibility, and became eligible for COBRA/State Continuation as of 11/1/19 or later.  These individuals are considered AEIs.  Note, going forward, any individuals eligible for COBRA/State Continuation who had an involuntary termination or any type of reduction of hours between 4/1/21 and 9/30/21 are considered AEIs as well.

Employers are required to send the new COBRA/State Continuation notices to any identified AEIs no later than 5/31/21.  Attached are 3 different model notices, depending on the AEI scenario, that were released by the DOL on 4/7/21.  (Again, note future AEIs eligible for COBRA/State Continuation between 4/1/21 and 9/30/21 should also receive the appropriate notice within the COBRA/State Continuation notification timeframe requirements.)  The 3 versions are:

A)    Model Notice in Connection with Extended Election PeriodTemplate used for qualified AEIs between 11/1/19 and 3/31/21 – this includes both AEIs currently enrolled, AND AEIs who waived COBRA/State Continuation between 11/1/19 and 3/31/21

B)     Model General Notice and COBRA Continuation Coverage Election Notice:  Template used for AEIs who have COBRA qualifying events “going forward” – between 4/1/21 and 9/30/21

C)    Model Alternative NoticeTemplate used for AEIs who have State Continuation qualifying events occurring between 4/1/21 and 9/30/21.   (This is typically only used by employers in Illinois with less than 20 employees.)

If an AEI responds electing COBRA/State Continuation, the employer will need to reinstate coverage (Medical, Dental and/or Vision) with the insurance company.  Note, some State Continuation laws only apply to medical insurance – see state specific law.  The AEI will reappear on the insurance company invoice and the employer will be responsible for paying the premium in full.  (Note, for employers subject to State Continuation as opposed to COBRA, the law indicates that the insurance company will be responsible for the premium and should not invoice the employer.  At the time of this summary, confirmation that employers will not have to pay the premium to the insurance company is not clear – the employer should check with their insurance company for details)

To be “reimbursed” for AEI COBRA premiums paid to the insurance company, the employer will claim a credit towards the employer’s portion of their Medicare payroll tax.  Instructions on the filing process are to be released at a later date.  Though it is expected that if the employer assistance is greater than the payroll tax obligation, it can be applied as a future credit or an employer form can be submitted to seek a refundable credit.  We advise you to work with your payroll provider and/or tax accountant if/when you have reimbursable COBRA premium.

If an AEI elects COBRA/State Continuation, the employer will need to track the date their COBRA/State Continuation would end (9/30/21 or the end of their COBRA/State Continuation period; whichever occurs earlier) and provide an “expiration notice” 15-45 days before the premium subsidy expires.  This 4th attachment is:

D)    Model Notice of Expiration of Premium Assistance:  Template for use by employers/administrators to send to enrolled AEIs 15-45 days before their premium assistance expires 

In addition to staying alert to updates & instructions from your COBRA administrator (if applicable), for further information, the DOL has provided the attached FAQs (pdf) for Employers and AEIs. 

Should you have any further questions, please feel free to contact your Stumm Client Service Team.