By Robert Q. Johnson, Labor & Employment

Employer Action Required Under New COBRA Guidance

Given the many complications the COVID pandemic has created for employment-based health insurance, it’s no wonder that COBRA has also been in flux lately. 

The changes began last year when the Department of Labor issued guidance “tolling” the COBRA election and payment period for one year effective as early as March 1, 2020. That meant an employee who had a COBRA qualifying event on March 15, 2020, would have their COBRA election and payment period tolled until March 15, 2021; in other words, that one-year period would be disregarded in determining whether the employee’s COBRA election and premium payments were made on time. This would generally leave the employee one year plus sixty days to make their COBRA election and pay their premiums, both retroactively. 

As the original one-year relief period was set to expire on February 28, 2021, the DOL issued further guidance clarifying that the one-year tolling period did not end for everyone on February 28, 2021; rather, it applies to each person individually based on the date of their qualifying event. So, for example, an employee with a COBRA qualifying event on July 1, 2020, would have their election and payment period tolled for one full year (i.e., the period between July 1, 2020, and June 30, 2021, would be disregarded) and would then have their regular COBRA election timeframe. All of this assumes the federally declared “outbreak period” has not ended, which to date it has not. 

In the more recent guidance, the DOL also advised employers to proactively notify anyone who may be eligible for this extension relief if the original COBRA notices they received did not discuss the extended timeframes. 

To complicate matters further, the recently passed American Rescue Plan Act of 2021 (the “ARP”) contains not only COBRA “premium assistance” but also a new COBRA election period for some people.

In short, the ARP provides that certain people, which it designates “assistance eligible individuals,” who are on COBRA or who are eligible to elect COBRA will not have to pay any COBRA premiums from April 1 through September 30. To get the premium assistance, the assistance-eligible individual must be on COBRA or eligible for COBRA because of an involuntary termination of employment or because of a reduction in hours (either voluntary or involuntary), and they must not be eligible for any other group health plan coverage or Medicare. For insured group health plans, the insurance carrier claims the premium directly; for self-insured group health plans, the employer recoups the premiums through a payroll tax credit. 

Notably, the premium assistance does not extend the duration of COBRA coverage. For example, if the regular coverage period for a former employee who is currently on COBRA will expire at the end of July 2020, their coverage will still end at the end of July even though the ARP waives COBRA premiums through September 30.  

The ARP does, however, allow a new COBRA election for assistance-eligible individuals who were eligible for COBRA but elected not to take it, or who elected COBRA but then stopped the coverage (again, only up to the time their COBRA coverage would have expired under the normal COBRA duration rules). This group of assistance-eligible individuals can elect COBRA back to April 1, 2021, (or earlier if eligible to do so and they pay for months prior to April 2021) even if they had previously rejected it. These assistance-eligible individuals must make an election to obtain the ARP’s free coverage within 60 days of receiving the employer-provided notice discussed below. The DOL guidance confirms that the one-year “tolling” period discussed above does not apply to the ARP election of subsidized COBRA. 

To carry all this out, the DOL has provided a set of frequently asked questions along with several model notices, all of which are available on the DOL website. These include a new model notice for anyone experiencing a COBRA qualifying event between April 1 and September 30; a new model notice, which must go out by May 31, 2021, for assistance eligible individuals who are currently on COBRA or who would be eligible for COBRA under the new election rules described above; a summary of the premium assistance rules, which must be provided to assistance eligible individuals; a new model notice required to be sent when an assistance-eligible individual’s premium assistance is getting ready to expire; and a model election form by which someone can claim status as an assistance-eligible individual or notify the employer that they no longer meet the requirements to be an assistance eligible individual.

These will require coordination among employers, insurers, COBRA administrators, and potentially other parties involved in the COBRA administration and payment process. The DOL guidance involves a number of moving pieces, not all of which can be explained in detail here, so we strongly encourage all employers to seek appropriate guidance to remain in compliance with these overlapping and complex requirements.

The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.