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Posted by: Altura Benefits in Insurance
The American Rescue Plan Act (ARPA) provided new and temporary COBRA premium assistance for Assistance Eligible Individuals. This premium assistance went into effect on April 1, 2021. It is set to expire on September 30, 2021. With this program coming to an end soon, both COBRA administrators and COBRA recipients will need to act fast to ensure compliance and to avoid issues with coverage.
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. Under this federal law, eligible employees, along with their spouses and dependents, can elect to continue health insurance coverage after a qualifying event. Qualifying events include loss of coverage due to a reduction in hours or termination of employment. Qualifying events also include other events that could cause individuals to lose their employer-sponsored coverage, such as divorce or aging out of a parent’s plan. Termination for gross misconduct is not considered a qualifying event.
Extended COBRA coverage can last for 18 or 36 months. However, during this period, the COBRA recipient may be required to pay the full premium cost along with a 2% administration fee. This can make coverage much more expensive than it was during active employment.
The federal COBRA law only applies to employers with 20 or more full-time or full-time equivalent employees. However, many states have enacted their own health insurance continuation laws, often called mini-COBRA laws, and these laws typically apply to smaller employers.
Because COBRA recipients may have to pay for the full cost of the premium out of pocket, along with an administrative fee, COBRA coverage can be unaffordable for many Americans who have recently experienced job loss.
To help Americans secure health insurance coverage during the COVID-19 pandemic, the ARPA created COBRA premium subsidies for Assistance Eligible Individuals.
Under this law, Assistance Eligible Individuals can receive a COBRA subsidy for the full amount of the premium. The subsides are available to certain people who qualify for health coverage continuation under the federal COBRA law, as well as certain people who qualify for health coverage continuation under state mini-COBRA laws.
The ARPA COBRA premium subsidy assistance is available between April 1 and September 30, 2021.
The American Rescue Plan Act also establishes a premium assistance tax credit.
To make up for this subsidy, the plans and employers that COBRA premiums would normally be paid to are eligible for a tax credit in the amount of the premium subsidy provided.
Who Counts as an Assistance Eligible Individual?
In order to qualify for the COBRA premium subsidy, a person must qualify for COBRA. However, not all people who qualify for COBRA will qualify for the premium subsidy.
To be counted as an Assistance Eligible Individual, a person must meet the following criteria:
The ARPA premium subsidies are scheduled to end on September 30, 2021.
Some people may see their COBRA premium subsidies end before the September 30 deadline. This could happen if the person become eligible for health insurance coverage through another group health plan or Medicare. A person may also lose premium subsides early if that person’s COBRA eligibility expires before September 30.
For many people, COBRA coverage eligibility will continue even after the premium subsidies expire. When the ARPA premium subsidies end, COBRA recipients may become responsible for the full cost of COBRA coverage. If they do not make premium payments, they may lose their coverage.
Without premium subsidies, COBRA can be an expensive coverage option. When the premium subsidies end, some people may want to switch to a different source of coverage rather than continue to pay for COBRA out of pocket. People who find themselves in this situation should see if they can enroll in a Health Insurance Marketplace plan or if they qualify for Medicaid. They may qualify for a Special Enrollment Period to elect a health plan through the Marketplace.
Employers, plans and others serving as COBRA administrators are required to send out timely COBRA notices to inform individuals of their options. This includes notices of COBRA eligibility and rights sent to people who qualify for COBRA coverage so that they can decide if they want to elect coverage.
Now that the subsidies are set to expire, plan administrators are also required to warn Assistance Eligible Individuals of the termination of COBRA premium subsidies. This notice, which should be sent between 15 and 45 days before premium assistance requires, provides information about the termination of premium assistance, as well as the other health insurance options going forward.
The Department of Labor has provided a model Notice of Expiration of Period Premium Assistance, and this model may be used to fulfil good faith compliance with the notice of expiration requirements. To use the model, the plan administrator will need to fill in the blanks in the model with the correct information.
COBRA beneficiaries also have certain requirements regarding communication. For individuals receiving ARPA subsidies, this includes notifying the plan administrator about eligibility for other group health plans or Medicare. Because the ARPA COBRA assistance subsidies are not available to people who qualify for coverage through another group health plan or Medicare, individuals much notify the plan administrators when they become eligible for such a plan. If they do not provide notice, they may face tax penalties as a result.
Count on Altura Benefits for a highly customized benefits experience. We help guide clients through the compliance maze and provide the tools and education to avoid the risks associated with non-compliance. Contact us to learn more.
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