Healthcare Reform for Self-Funded Employers

NEW TEMPORARY COBRA SUBSIDY PROVIDED UNDER THE AMERICAN RESCUE PLAN ACT

New Temporary COBRA Subsidy provided under the American Rescue Plan Act

The American Rescue Plan Act signed by the President on Thursday, March 11, 2021 requires that from April 1, 2021 through September 30, 2021, certain COBRA qualified beneficiaries who are referred to as “assistance eligible individuals” who elect or will elect COBRA are not charged any amounts for COBRA coverage (premium assistance or subsidy). The employer, plan or insurer, as applicable, will be reimbursed for such amounts through a federal tax credit (against FICA taxes that fund Medicare hospital benefits). The statute also includes various notice requirements regarding the subsidy.

Duration and Applicability
The subsidy starts April 1, 2021 and ends September 30, 2021, unless ending sooner because the individual is no longer eligible as explained below.

“Assistance eligible individual” means someone, during the period of coverage on April 1, 2021 and ending on September 30, 2021:

(A) who is a COBRA qualified beneficiary because of loss of employment (other than voluntary termination of employment or gross misconduct) or reduction in hours, and
(B) who elects COBRA coverage.

A person is no longer an “assistance eligible individual”:

(A) On the first date that individual is:
1. eligible for coverage under any other group health plan (other than coverage under excepted benefits, a flexible spending arrangement, or a qualified small employer health reimbursement arrangement), or
2. eligible for Medicare, or
(B) The date following expiration of the maximum period of continuation coverage required under the applicable COBRA continuation coverage provision.

Extension of Election Period
In addition, the following individuals may elect COBRA continuation coverage during the period beginning April 1, 2021 and ending 60 days after the date on which a new notification is provided to such individual:

(A) an individual who does not have an election of COBRA continuation coverage in effect on April 1, 2021 but who would be an assistance eligible individual if such election were so in effect (i.e. they were involuntarily terminated (for other than gross misconduct) or had a reduction in hours; or
(B) an individual who elected and discontinued COBRA continuation coverage before the April 1, 2021.

Commencement of Cobra continuation coverage.
Any COBRA continuation coverage elected by a qualified beneficiary during an extended election period begins with the first period of coverage beginning April 1, 2021 and lasts as long as it normally would.

Notice of Premium Assistance
COBRA notices have to include an additional written notification within sixty days of April 1, 2021 (May 31, 2021) to the recipient in clear and understandable language of-

(A) the availability of premium assistance;
(B) the option to enroll in different coverage if the employer permits assistance eligible individuals to elect enrollment in different coverage.
(C) the forms necessary for establishing eligibility for premium assistance
(D) the name, address, and telephone number necessary to contact the plan administrator/COBRA administrator and any other person maintaining relevant information in connection with such premium assistance
(E) a description of the extended election period;
(F) a description of the obligation of the qualified beneficiary to notify when becoming eligible for other group health coverage or Medicare and the penalty for failing to notify;
(G) a description, displayed in a prominent manner, of the qualified beneficiary's right to a subsidized premium and any conditions on entitlement to the subsidized premium; and
(H) a description of the option of the qualified beneficiary to enroll in different coverage if the employer permits such beneficiary to elect to enroll in such different coverage.

Example: Jeff was laid off on October 1, 2020. Because of the federal guidance issued by the former administration that extended the deadlines for electing COBRA, Jeff will still be eligible to elect COBRA. Jeff can choose to elect COBRA starting, for example, April 1, 2021, and Jeff can access the COBRA subsidy that will pay for all of his COBRA premiums through September 30, 2021. Alternatively, Jeff can elect COBRA coverage retroactive to October 1, 2020 in accordance with the federal guidance extending the deadlines for electing COBRA. However, the COBRA subsidies do not apply until April 1st through September 20, 2021 during which Jeff will not have to pay for COBRA premiums.

Election Changes Permitted by Employer
Subject to the requirements below, any assistance eligible individual who is enrolled in a group health plan offered by a plan sponsor may, not later than 90 days after the date of notice of the plan enrollment option, elect to enroll in coverage under a plan offered by such plan sponsor that is different than coverage under the plan in which such individual was enrolled at the time of the qualifying event, because of loss of employment (other than voluntary termination of employment or gross misconduct) or reduction in hours.

Requirements. Any assistance eligible individual may elect to enroll in different coverage as described above only if –

the employer will permit such assistance eligible individual to enroll in different coverage;
the premium for such different coverage does not exceed the premium for coverage in which such individual was enrolled at the time such qualifying event occurred;
the different coverage in which the individual elects to enroll is coverage that is also offered to similarly situated active employees of the employer at the time at which such election is made; and
the different coverage in which the individual elects to enroll is not providing only excepted benefits, a qualified small employer HRA or a FSA.

Notice of expiration of period of premium assistance.
During the 45 to 15 days before the expiration of premium assistance, the plan administrator/COBRA administrator must provide a written notice in clear and understandable language to the assistance eligible individual-

(A) that the premium assistance for that individual will expire soon and the prominent date of such expiration; and
(B) that the individual may be eligible for coverage without any premium assistance through-
1. COBRA continuation coverage; or
2. coverage under a group health plan.

However, no notice of premium assistance expiration is required when coverage is ending because an individual is eligible for coverage under any other group health plan or Medicare.

Federal regulators must issue a model notice of the expiration of premium assistance no later than 45 days after enactment of the law.

COBRA Payment Overpayment
Any assistance eligible individual who pays COBRA premium in error and is otherwise subject to the premium relief, must be reimbursed not later than 60 days after the date on which such individual made the premium payment.

Tax Credit
The “person to whom premiums are payable” (as defined below) for continuation coverage is allowed a credit against the tax imposed by section 3111(b) of the IRC (the FICA tax that funds Medicare hospital benefits), or so much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b), for each calendar quarter an amount equal to the premiums not paid by assistance eligible individuals for such coverage.

Person to Whom Premiums Are Payable means –

(A) The plan, if a multiemployer plan,
(B) the employer maintaining the plan, if a single employer group health plan which is, subject to the COBRA continuation provisions contained in the Internal Revenue Code, ERISA, or the Public Health Service Act, or under which some or all of the coverage is not provided by insurance
(C) the insurer, in the case of any group health plan not described in paragraph (A) or (B).

Tax Credit is Refundable
If the amount of the credit exceeds the amounts allowed for any calendar quarter, such excess shall be treated as an overpayment that shall be refunded.

Tax Credit may be advanced
In anticipation of the credit, including the refundable portion, the credit may be advanced, according to forms and instructions provided by the federal regulators, through the end of the most recent payroll period in the quarter.

We anticipate federal guidance on this new legislation.

COBRA Subsidy FAQs

Does the subsidy only apply to health coverage, or does it also apply to dental and vision?
The subsidy also applies to dental and vision coverage.
When will the COBRA Continuation Notice (“Notice”) and Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021 be mailed?
Trustmark will begin mailing the Notices on 5/1/21.
How much time will an assistance eligible individual have to elect COBRA?
60 days from the date the Notice is provided. The period of time in which to elect COBRA under the American Rescue Plan Act of 2021 is not eligible for an extension pursuant to the Notification of Relief issued by the Department of the Treasury and the IRS due to the National Emergency or the subsequent relief in EBSA Disaster Relief Notice 2021-01.
If a dependent’s coverage terminates because the dependent is no longer eligible (i.e. due to age), do they qualify for the subsidy?
No, this is not an involuntary loss of employment or a reduction in hours.
Is death of an employee considered an involuntary loss of employment, or a reduction in hours, for purposes of the COBRA subsidy?
Death is not considered an involuntary loss of employment, or reduction in hours and does not qualify a dependent for the COBRA subsidy.
Is military leave considered an involuntary loss of employment, or a reduction in hours, for purposes of the COBRA subsidy?
Military leave would be a reduction in hours that would trigger the COBRA subsidy
If an individual who qualifies for the subsidy has already paid for their COBRA coverage, will Trustmark Health Benefits work with the client to reimburse the individual?
Yes, the COBRA team will determine whether a refund is due and if so, issue reimbursement to the individual/client.