With these changes to the Consolidated Omnibus Budget Reconciliation Act come a number of additional obligations on employers. This article will describe some of the key aspects of the ARPA's changes to COBRA, as well important steps employers should consider in light of these changes.
Only employees whose employment has been involuntarily terminated or whose hours have been reduced are entitled to receive the employer-provided COBRA premiums. Employers are entitled to recoup these payments in the form of payroll tax credits, so the payments are referred to as COBRA subsidies.
Employees and their family members who are eligible for the subsidies are referred to as assistance-eligible individuals. The ARPA requires that the COBRA subsidies be paid for periods of coverage from April 1 through Sept. 30, provided that the assistance-eligible individuals elect COBRA, or continuation coverage.
Although the ARPA applies to group health plans subject to federal COBRA, and federal COBRA continuation coverage provisions do not apply to group health plans sponsored by employers with fewer than 20 employees, participants and beneficiaries of smaller employers' group health plans may still be eligible for the subsidies under state laws that provide comparable coverage, often referred to as mini-COBRA laws. Accordingly, the requirements to provide subsidies and notices may apply to smaller employers as well.
While many employers use third-party administrators to administer COBRA, there are important steps employers should take to notify employees of their rights and avoid penalties. While the law refers to the health plans as the parties with notice obligations, the employers are ultimately responsible.
If the employer typically provides COBRA notices and information directly to employees, the employer should provide the ARPA information, or at a minimum, check with their health plans to make sure they are complying with the law's requirements.
Determine Employee Eligibility
To be eligible for the COBRA subsidy, and be an assistance-eligible individual, the affected employee, former employee and family members must:
- Be COBRA-qualified beneficiaries;
- Be eligible for COBRA continuation coverage by reason of a qualifying event that is an involuntary termination of employment, or a reduction in hours — such as reduced hours due to change in a business's hours of operations, a change from full time to part time, a temporary leave of absence, or participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced, or during the period of April 1 through Sept. 30;
- Elect COBRA continuation coverage;
- Not have been involuntarily terminated from employment due to gross misconduct;
- Not be eligible for Medicare; and
- Not be eligible for coverage under any other group health plan, such as a plan sponsored by a new employer or a spouse's employer.
Please note that employees who participate in a voluntary separation program may be assistance-eligible individuals entitled to the COBRA subsidy. This issue has not been specifically addressed by the U.S. Department of Labor in connection with the ARPA but employers should not assume that participation in a voluntary separation program disqualifies employees from being eligible for the COBRA subsidy.
Employees who had a qualifying event entitling them to COBRA before April 1 may be eligible for a portion of the COBRA subsidy, assuming they are entitled to COBRA during any portion of the April 1 through Sept. 30 period. Assistance-eligible individuals who did not elect COBRA at the time will now have a second opportunity to elect COBRA and receive the subsidy.
The law requires that employees whose employment was involuntarily terminated or whose hours were reduced as far back as Nov. 1, 2019, receive a notice of their rights under the ARPA and another opportunity to elect COBRA in light of the subsidy.
Third-party administrators may not be aware of former employees' eligibility or might not have current contact information for them. Accordingly, employers must first ascertain who, since Nov. 1, 2019, qualifies as an assistance-eligible individual, and then inform the third-party administrator or send notices directly to the assistance-eligible individuals.
Although the renewed right to elect COBRA applies to assistance-eligible individuals who were eligible for COBRA since Nov. 1, 2019, the COBRA subsidy only covers the period of April 1, 2021, through Sept. 30, 2021, assuming they elect COBRA.
Plans and issuers are required to notify qualified beneficiaries regarding the COBRA subsidy and other information about their rights under the ARPA, including notice of expiration of the period for the COBRA subsidy.
Although these notices must be supplied by the plans and issuers, we suggest including information about the ARPA subsidy in employer notifications to assistance-eligible individuals whose employment is or has been involuntarily terminated, or whose hours have been reduced, from Nov. 1, 2019, until Sept. 30, 2021. This notification should let the employees know about the subsidy, their potential eligibility, that they may have an additional opportunity to elect COBRA, and state that additional information will be provided by the plan.
The Department of Labor has issued four model notices:
- A general COBRA continuation coverage election model notice;
- An extended election period model notice, which must be provided by May 31;
- A mini-COBRA model notice; and
- A premium assistance expiration model notice, which must be provided 15-45 days before the COBRA subsidy expires.
Employers do not need to modify separation agreements that they have entered into with former employees who may be eligible for the COBRA subsidy. Likewise, there is probably no need to modify templates or model forms of separation agreements unless a substantial portion of the consideration for the release is payment of COBRA premiums.
Human resources professionals, chief financial officers, office managers or whoever normally communicates with separated employees should be up to speed on the ARPA's requirements in order to answer questions from employees. Employees who may have already paid for COBRA premiums during the April 1 to Sept. 30 window before receiving the notices are likely to ask about getting reimbursed so employers should also be prepared to refund or credit these payments.
Under the ARPA, key steps employers should consider include: determining which current and former employees qualify as an assistance-eligible individual; ensuring their COBRA notices have been updated to satisfy the additional notice requirements and are sent no later than the dates required by the ARPA; and bringing HR representatives up to speed with the new changes and training them on what to communicate with affected employees.
Randi May is a partner and head of the employment law group at Hoguet Newman Regal & Kenney LLP.
Dustin Grant is an associate at the firm.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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