Since the American Rescue Plan Act was signed into law on March 11, 2021, the impacts on COBRA and State Continuation were not fully understood until recent guidance was released. We will review the eligibility, the model notice (which is now available), and update the timeline for notification and premium assistance as it relates to COBRA. The states and several carriers have yet to weigh in on State Continuation and how it will work in Ohio, Kentucky, and Indiana, however the notification and subsidization requirements still exist. Following the review of the ARPA legislation, you will find a detailed guide by carrier and plan type outlining who is responsible for the notification, with and without a vendor, and who ultimately files and receives the tax credit.
As previously stated in the initial review of ARPA, assistance eligible individuals (AEI) will receive 100 percent subsidy for their COBRA and State Continuation premiums under two circumstances:
- Employee was involuntarily terminated with a qualifying event between November 1, 2019, to present. One qualifier here is that the employee was not terminated for “cause” during this timeframe. In addition, the employee is still within their 18-month period of coverage as stipulated by COBRA guidelines. State continuation eligibility again varies by carrier, plan, and state.
- Employee’s hours were reduced by an amount triggering the employee’s loss of eligibility for benefits.
An AEI ceases to be eligible for the premium subsidy if he/she becomes eligible for other group health coverage through a new employer, a spouse’s plan, or with Medicare.
The new model notice for those currently on COBRA and AEI’s who are eligible is available here and here and on the DOL.gov site, which are required to be sent to all AEI’s by May 30, 2021. The notice required to be sent in the case of State Continuation is called the Alternative Model Notice and is located here. So, it is important that employers begin immediately identifying their list of eligible terminated employees to assist the carrier/vendor, if applicable, with the notification requirement or so that the employer can send the model notice in a timely fashion if applicable. Individuals have 60 days to elect COBRA from the date of receipt of the notice. Due to the timing of the model notice and the notification period, it is expected that any eligible individual currently on COBRA will continue to make payments for the months of April and May. Individuals who previously declined COBRA are eligible as long as their 18-month coverage period has not expired. As well, individuals who elected and are currently on COBRA or who elected and later dropped COBRA are eligible as long as their 18-month coverage period has not expired.
COBRA subsidies will be paid at 100 percent for the AEI from April 1, 2021, to September 30, 2021. There is also a requirement for employers (plan) and issuers (carriers) to notify those individuals who elect and are awarded the subsidy when the premium subsidization is due to expire. This notice is due between 15 to 45 days prior to the expiration of the subsidy and the AEI would then be eligible for an SEP to enroll in coverage through the marketplace.
Generally speaking, whichever entity is responsible for paying the COBRA premium subsidy for the AEI, carrier or employer, will also be the party who files and receives the tax credit. The credit is taken against the Medicare tax an employer is responsible for.
The guide below will provide available information to date by carrier and by plan. If you have any questions about the requirements or available notices, please give your broker advisor a call. We recommend that you seek specific advice on filing for the premium tax credit with your accounting professional.