The American Rescue Plan Act (ARPA) created some additional COBRA continuation coverage rights for qualified beneficiaries when the qualified beneficiary’s loss of coverage was due to involuntary termination or reduction in hours. Specifically, these qualified beneficiaries are generally eligible to receive a government subsidy towards the cost of COBRA continuation coverage for the period from April 1, 2021 to September 30, 2021. Those who allowed COBRA coverage to lapse or did not elect such coverage and would otherwise be eligible for the subsidy are permitted a second opportunity to elect COBRA coverage and receive a government subsidy towards the cost of coverage for the same period. These individuals taking a “second bite at the apple” may truncate their election to begin as of the effective date of the subsidy - April 1, 2021 (rather than going back to the initial date of COBRA eligibility). In addition, if permitted by the employer, different coverage than what was previously provided – this right would apply to all qualifying beneficiaries, not just subsidy-eligible qualified beneficiaries.
ARPA imposes notice requirements on employers to advise qualified beneficiaries of their COBRA subsidy rights. On April 7, 2021, the Department of Labor (DOL) issued four model COBRA notices to employers: a general notice; an alternative notice for complying with notice requirements when the employer is subject to a state program of continuation coverage similar to COBRA; a notice to deal with those individuals who are eligible to make a second chance election; and a notice of expiration of premium assistance. Further, the DOL issued a summary of COBRA premium assistance provisions which must accompany notices other than the notice of expiration of premium assistance. Each notice comes in several parts, many of which will look familiar to employers. For purposes of this client alert, we will only discuss the general notice, the notice in connection with extended election period, and the expiration notice.
The general notice must be sent to all qualified beneficiaries who experienced a qualifying event at any time between April 1, 2021, through September 30, 2021 (the “COBRA Subsidy Period”). This will create headaches for employers because employers must notify individuals who are not eligible for the ARPA benefits (e.g., voluntary terminations or loss of coverage for reasons unrelated to the employee’s involuntary termination or reduction in hours) of their existence. Inevitably, some participants will assume they are, in fact, eligible and request the benefit and employers will need to spend time explaining to the qualified beneficiary why they are ineligible.
There is no specific timeframe in which these notices must be sent; however, the sixty (60) day period within which an assistance eligible individual may elect COBRA does not run until this general notice is received. Therefore, it is in an employer’s interest to get this notice out sooner rather than later.
The Notice in Connection with Extended Election Period (or the second chance election notice) is designed to be provided to assistance eligible individuals (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who: (1) is already on COBRA and had experienced a qualifying event that would permit subsidized COBRA coverage at any time during the COBRA Subsidy Period; or (2) who had experienced a qualifying event that would permit subsidized COBRA coverage at any time during the COBRA Subsidy Period but who either did not elect coverage continuation coverage or elected it but had subsequently discontinued COBRA continuation coverage. For a copy of these notices, click COBRA Premium Subsidy | U.S. Department of Labor (dol.gov).
In addition, the guidance makes clear that the Notice of Expiration of Period of Premium Assistance must be provided to assistance eligible individuals between 15 and 45 days before their premium assistance expires. This would apply in a situation where the individual reaches the maximum period of continuation coverage or where the premium assistance ends due to the passage of time. It does not appear to apply to a situation where the assistance eligible individual becomes eligible for other qualifying coverage.
Employers must now distribute appropriate notices to subsidy-eligible qualified beneficiaries. For those who experienced an involuntary termination prior to April 1, 2021 (and generally after November 1, 2019 for those plans which begin coverage on the first of the month following the qualifying event), the DOL requires the notice in connection with extended election period be provided to such individuals by May 31, 2021. While there is no specific deadline for the general notice to all qualified beneficiaries (i.e., those with any qualifying event after April 1, 2021), based upon the foregoing information, the sooner the employer can provide this information the better because it will start tolling the 60-day election period.