The American Rescue Plan Act of 2021 (ARP) contains certain provisions related to the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA.
A recently released Department of Labor (DOL) FAQ answers questions from stakeholders to help individuals understand the law and its impact.
COBRA provides group health plan continuation coverage rights for participants and beneficiaries covered by a group health plan. An employee who experiences a qualifying event (e.g., termination of employment, reduction in hours worked) may elect COBRA continuation of coverage. The ARP includes temporary COBRA premium assistance to pay for health coverage for Assistance Eligible Individuals (AEI) from April 1, 2021, through September 30, 2021.
An AEI is a COBRA qualified beneficiary who meets both of the following requirements:
- Is eligible for COBRA continuation coverage by reason of a qualifying event that is reduction in hours or an involuntary termination of employment
- Elects COBRA continuation of coverage
An individual is not eligible for premium assistance if they are eligible for other group health coverage such as through a new employer’s plan, a spouse’s plan, or Medicare. Individuals receiving premium assistance must notify their plan if they’re eligible for coverage under another group health plan or for Medicare.
Plans and issuers are required to notify qualified beneficiaries about the premium assistance and provide other information about their rights under the ARP as follows:
- A general notice to all qualified beneficiaries who have a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021, through September 30, 2021. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
- A notice of the extended COBRA election period to any AEI (or any individual who would be an AEI if a COBRA continuation coverage election were in effect) who had a qualifying event before April 1, 2021. This notice must be provided within 60 days following April 1, 2021 (i.e., May 31, 2021).
The ARP also requires plans and issuers to provide individuals with a notice of expiration of periods of premium assistance explaining that the premium assistance will be expiring soon, the date of the expiration, and that the individual may be eligible for coverage without any premium assistance. This notice must be sent at least 15 days but no more than 45 days prior to the expiration of the premium assistance coverage.
The notices must include all the following information:
- The forms necessary for establishing eligibility for the premium assistance
- Contact information for the plan administrator or other person maintaining relevant information in connection with the premium assistance
- A description of the additional election period, if applicable
- A description of the requirement that the AEI notify the plan when he/she becomes eligible for coverage under another group health plan or eligible for Medicare and the penalty for failing to notify
- A description of the right to receive the premium assistance and the conditions for entitlement
- If offered by the employer, a description of the option to enroll in a different, more affordable health option available under the plan
Model notices are available on the DOL website.
Planning and action
Most, if not all, educational entities work with a third-party administrator (TPA) to administer their COBRA provisions. Below is a list of steps to take:
- Contact your TPA to discuss ARP compliance.
- Assist the TPA to identify AEIs.
- Notify the TPA of voluntary and involuntary terminations.
- Confirm how the TPA will ensure AEIs are not dropped from coverage, except as permitted by the ARP.
- Work with your health plan provider to determine if an AEI is eligible to switch to a less-expensive plan option.
- Ensure COBRA communications are updated and provided as needed.
A collaborative effort between HR and the TPA will ensure the ARP provisions are properly administered to eligible employees.
Karen Dooley is a senior HR consultant at TASB HR Services. Send Karen an email at email@example.com.
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