As we mentioned in our May 23, 2021, article, the American Rescue Plan Act of 2021 (ARPA) provides a 100 percent premium subsidy for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) between April 1 and September 30, 2021, for certain assistance eligible individuals (AEIs). A part of an employer’s and plan administrator’s obligation is to notify AEIs that their subsidies are about to expire. Due to the timing requirements described below, plan administrators and their third party administrators must notify affected COBRA participants that their COBRA premium subsidies are ending soon.
When does the COBRA premium subsidy end?
The AEIs’ subsidies end on the earlier of: (1) September 30, 2021, (2) the date the AEIs reach the end of their maximum COBRA continuation coverage period, or (3) the date the AEIs become eligible for Medicare or another group health plan. (Remember, AEIs are required to notify plan administrators if they become eligible for such coverage, and failure to do so may result in a tax penalty.)
Who is to receive the COBRA subsidy expiration notice?
Plan administrators must provide the new notice to AEIs who will lose the subsidy due to (1) the end of the COBRA subsidy period (on September 30, 2021), (2) the end of the individual’s COBRA continuation coverage period, or (3) the first period of coverage beginning on or after the date the individual becomes eligible under another group health plan including Medicare. Although the subsidy will end earlier than September 30, 2021, for some individuals, plan administrators likely will need to send a large number of expiration notices to AEIs with subsidies that will end as of September 30, 2021.
When are plan administrators required to provide this expiration notice?
Plan administrators must notify AEIs at least 15 days (but no more than 45 days) before they will lose the subsidy. That means in most cases, notices need to be sent by September 15, 2021.
What must the expiration notice include?
The notice must explain in “clear and understandable language” when the AEI’s subsidy is set to expire and indicate the expiration date in a prominent way.
The notice must also describe other coverage options for which a special enrollment period may be available, including group coverage through a Health Insurance Marketplace or Medicare.
As illustrated in the U.S. Department of Labor (DOL) model notice, required information includes (1) the factors an AEI should consider in choosing among coverage options, (2) how and when to enroll in medical benefits, (3) the difficulty of changing to other coverage options at a later date, and (4) how much time remains in the COBRA coverage period, and (5) the full, unsubsidized premium amount owed should the AEI choose to keep his or her COBRA coverage in effect.
Stephanie A. Smithey is a shareholder in the Indianapolis office of Ogletree Deakins and co-chair of the firm’s Employee Benefits and Executive Compensation practice group.
Jennifer L. Lucas is a paralegal in the Indianapolis office of Ogletree Deakins.
