As part of the American Rescue Plan Act of 2021, certain individuals who are eligible for and elect continuation of medical coverage under the Consolidated Omnibus Budget and Reconciliation Act of 1985, as amended (COBRA) or other similar state and local laws became eligible to receive COBRA continuation coverage subsidized by the federal government beginning on April 1, 2021, and ending on September 30, 2021.
As we previously wrote, group health plans are required to notify qualified beneficiaries in several different manners about their rights for subsidized COBRA under the Act. The DOL has released three model notices for this purpose, together with a set of frequently asked questions for the Act’s implementation.
For the specific notices, first, employers are required to provide a general notice to all qualified beneficiaries who have a COBRA qualifying event that consists of a reduction in hours or an involuntary termination of employment from April 1, 2021, through September 30, 2021. The notice may be provided separately or with the plan’s regular COBRA election notice following a COBRA qualifying event. The model notice for this purpose can be found here.
Second, the Act also requires health plans that are subject to COBRA to provide a special COBRA election period to individuals who are eligible for the COBRA subsidy and who did not elect COBRA continuation coverage (or who cancelled COBRA continuation coverage) to enroll in this subsidized COBRA coverage beginning on April 1, 2021, and ending 60 days after an updated COBRA notice is sent to those terminated employees. Thus, former employees and their dependents who lost health coverage as far back as October 1, 2019, may benefit from the subsidy, since their 18-month maximum COBRA period will not expire before April 1, 2021. The Act requires health plans to notify individuals eligible for this special COBRA election period within 60 days of the Act’s passage, which sets a May 31, 2021, deadline. The model notice for this purpose can be found here. This notice presents a challenge for many employers as they will need to provide this notice (or their own notice) to employees who lost health coverage through a termination of employment or reduction in hours as far back as October 2019.
Finally, individuals who are receiving a subsidy must receive an additional notice informing them of the expiration of their subsidy between 15 and 45 days before the subsidy’s expiration. The notice must include the date of expiration and commentary indicating that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan. The model notice for this purpose can be found here.
The DOL previously modified the timing of COBRA notices due to the COVID-19 National Emergency. However, this DOL guidance indicates that the extensions for other COBRA notices do not apply to these required notices under the Act. The DOL has indicated that it is committed to ensuring individuals receive benefits to which they are entitled under the Act and its guidance indicates that employers can be subject to an excise tax of $100 per qualified beneficiary (of up to $200 per family) for each day that an employer is in violation of the COBRA rules for failing to provide the required notices.