Additional Guidance for Flores COBRA Clients & Partners on the American Rescue Plan Act of 2021
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA) into law. Included in this legislation are important requirements related to COBRA.
Our team is continuing to work to determine ARPA's impact on COBRA administration. We have included our current analysis below. We will provide additional updates in the coming weeks regarding process changes that may be required to the COBRA services we administer on your behalf.
Who is considered eligible for a 100% COBRA subsidy?
- Assistance Eligible Individuals (AEIs) are those who have been offered COBRA due to involuntary termination of employment or a reduction of hours, and who could have been covered under COBRA in April 2021 or a later due to said Qualifying Event.
- It is unclear whether a “reduction of hours” Event qualifies for premium assistance if the reduction of hours was for a “voluntary” reason, or if the individual’s reduction of hours must have been “involuntary” in order to qualify for relief. Further clarification is expected from the Department of Labor in the coming weeks.
- Eligibility for additional coverage may disqualify an individual from being considered eligible for a COBRA subsidy. Disqualifying coverage includes group health plan coverage; coverage under a flexible spending arrangement; coverage under a qualified small employer health reimbursement arrangement (QSEHRA); or Medicare.
- AEIs who become eligible for other coverage and fail to provide notice of their eligibility for other disqualifying coverage may be subject to a penalty of $250. If there is an intentional failure to notify, the individual shall pay a penalty equal to the greater of $250; or 110% of the premium assistance provided under ARPA after ineligibility occurs. ARPA includes an exception if the failure to notify is due to reasonable cause and not to willful neglect.
When is the subsidy available?
- COBRA subsidies are available beginning on the first day of the month following the enactment of the American Rescue Plan Act (April 1, 2021), and will expire on September 30, 2021.
- APRA does not extend the timeframe that COBRA benefits are available to a former employee and/or their covered dependents. If a qualified beneficiary’s COBRA period expires before September 30, 2021, the subsidy eligibility will also end.
- If an AEI’s COBRA eligibility period will extend beyond September 30, 2021, the qualified beneficiary will be responsible for paying the full COBRA premium due beginning October 1, 2021.
Does an AEI have to have an active COBRA election to qualify?
- No. ARPA includes an extended election period provision that allows any individual who experienced a Qualifying Event that would have resulted in COBRA eligibility in April 2021, to elect coverage to be effective April 1, 2021.
- In addition, an individual who elected COBRA and allowed coverage to lapse, but would have been eligible for coverage in April 2021, has the option to reinstate COBRA coverage effective April 2021 to take advantage of the subsidy.
- Individuals who enroll during this extended election period are not able to continue coverage beyond the date when their original COBRA eligibility period would have expired.
- For example, an AEI who was offered COBRA that would have started on or after October 2, 2019, could elect subsidized coverage for all or a part of April 2021 only (April being their 18th month of COBRA eligibility).
- Lastly, a COBRA qualified beneficiary is normally only able to elect the same coverage they had at the time of their Qualifying Event. APRA also gives employers the option to allow those eligible for an extended election period to change their benefit election to enroll in a lower cost option.
- Individuals who may qualify for an extended COBRA election period and premium subsidy must be notified. Additional notice requirements will apply when subsidy eligibility is coming to an end.
- The Department of Labor (DOL) is expected to release updated model notice language no later than 30 days after APRA being signed into law on March 11, 2021. Flores will be updating notice language to comply with the latest DOL model notices once these are published by the Department of Labor.
- A per notice fee will be billed if you would like Flores to assist in sending ARPA notices to qualified beneficiaries who have already been offered COBRA.
- More details will be provided in the coming weeks regarding what Flores will need from you to issue notices to COBRA qualified beneficiaries who may qualify for APRA relief.
- In the meantime, we encourage you to audit your records to identify all employees who have experienced a COBRA Qualifying Event due to involuntary termination of employment or reduction of hours that would have resulted in a COBRA period beginning on or after October 2, 2019. Flores’ “Notices Sent” report, which is available to download from our employer portal, www.flores247.com, may be a good place to start.
- As a reminder, Flores can track whether COBRA has been offered due to a “voluntary” or “involuntary” termination of employment.
- If COBRA data is sent to Flores by a file, and your file feed is not currently capturing “voluntary” verses “involuntary” termination reasons, we recommend you contact your file provider to request that they adjust the coding on your Qualifying Ev ent file.
- COBRA Event code reason “1” translates to “Termination – Voluntary”
- COBRA Event code reason “10” translates to “Termination – Involuntary”
- Please reach out to your dedicated Account Manager if you have general questions or need clarification about the changes that might be needed to your Qualifying Event file feed.
Thank you for your continued trust and support. Please contact your Dedicated Account Manager at (800) 532-3327 for specific questions regarding the plans we may administer on your behalf.