ARP COBRA Subsidy Special Election Opportunity: Who Gets a Second Bite at the Apple, and How Do They Take It?
The American Rescue Plan (“ARP”) offers a special 60-day election period for certain individuals who previously declined or discontinued COBRA coverage (“Assistance Eligible Individuals” or “AEIs,” as defined in ARP). These individuals may elect COBRA coverage prospectively, beginning April 1st, at no cost, as long as they are not eligible for Medicare or other group health coverage (with certain exceptions).
This post examines who gets this “second bite at the apple” during the special election period based on the recent guidance issued by the U.S. Department of Labor (“DOL”), and what notice requirements are imposed on plan administrators with respect to this special election period. The DOL guidance, issued on April 7, 2021, includes model notices and FAQs, which answer some questions about the second election opportunity and the ARP subsidy in general, but also raise additional questions.
Who Gets the Special Election Opportunity and What Is It?
An “Assistance Eligible Individual” under ARP is a qualified beneficiary who, during the period from April 1, 2021 to September 30, 2021, is eligible for COBRA coverage due to a reduction in hours or involuntary termination of employment, and who elects such coverage. An individual who did not have COBRA coverage on April 1st, but who would be an AEI had they previously elected or stayed on COBRA, is entitled to a special COBRA enrollment opportunity (the titular “second bite”) in order to receive the 100% COBRA subsidy.*
The ARP special election period is distinct from the normal COBRA election rules, which generally provide for a retroactive election of COBRA coverage to the date the qualified beneficiary lost group health coverage. Under the ARP special election period, AEIs are permitted to prospectively elect COBRA, starting on April 1st (i.e., coinciding with the subsidy period). However, the special election period does not extend an individual’s maximum period of COBRA coverage. Thus, an AEI who became eligible for COBRA coverage on January 1, 2020 and elects COBRA during the special election period is eligible for COBRA only until June 30, 2021 (18 months from the qualifying event), unless the period is extended under the normal COBRA rules (i.e., due to disability or a second qualifying event). In addition, the DOL made clear that the 60-day election period is not subject to the COVID-19 extended tolling period as set forth in EBSA Disaster Relief Notice 2021-01 and described in detail here. However, as a result of the extended tolling period, an individual may still have an opportunity to elect COBRA coverage retroactive to the date of the loss of coverage (with payment of the required premiums), instead of electing COBRA only on a prospective basis under ARP’s special election opportunity.
Notice of the Special Election Opportunity
The plan administrator must send a special election notice to these individuals by May 31, 2021. The special COBRA election period begins on April 1, 2021 and ends 60 days after the notice is provided to the individual. (Although some of the DOL notices and FAQs note that the 60-day period runs from the date of receipt, we understand that the DOL did not intend to revise the regular COBRA rules, which key the election deadline off of the date notice is “provided”). The packet sent to these individuals should include the Model Notice in Connection with Extended Election Period tailored to reflect the specific facts and circumstances, along with the Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021, which explains the COBRA subsidy and includes an election form and a form for the individual to notify the plan if they become ineligible for the subsidy due to eligibility for other coverage (see below).
*Open Question: While it seems that the intention of ARP was to open up a special election opportunity for individuals to take advantage of the government’s COBRA premium subsidy, it appears that the statutory language can be read more broadly to allow even individuals not eligible for the subsidy to take advantage of this second election opportunity. This ambiguity is not resolved in the DOL FAQs, so we await any additional clarification from the regulators.
How to Elect Subsidized COBRA
To elect the COBRA premium subsidy, the AEI must complete a “Request for Treatment as an Assistance Eligible Individual,” in which they certify that they are not eligible for other group health plan coverage or Medicare. Once receiving the COBRA premium subsidy, the AEI must also notify the plan administrator if they become eligible for other group health plan coverage or Medicare during the subsidy period. A failure to so notify the Plan may result in the individual being assessed a penalty of $250 or 110% of the premium assistance that was provided after they were no longer eligible.
Subsidy Expiration Notice
In addition to the notifying individuals of the right to elect subsidized COBRA, plan administrators must notify AEIs of the expiration of their subsidy period. The DOL’s Model Notice of Expiration of Period of Premium Assistance must be provided no later than 15 days and no more than 45 days before the date of the subsidy’s expiration. This notice must be provided if the subsidy period is expiring due to the end of the individual’s maximum period of COBRA coverage, or the end of the ARP subsidy period on September 30, 2021. Notice is not required if the subsidy period is ending due to the individual becoming eligible for other group health coverage or Medicare. Practically, it may be difficult (if not impossible) to provide this notice within the above timeframe, particularly if an AEI already is near the end of their maximum period of COBRA coverage (i.e., an AEI whose maximum COBRA period ends on April 30, 2021). Plan administrators should make a good faith effort to comply with the deadline or provide notices as soon as practicable. Consideration may be given to including the expiration notice in the initial election package, depending on when the package will be sent and when the COBRA premium subsidy will expire.
To Be Continued
Even with the issuance of the DOL FAQs and model notices, there are many unanswered questions regarding the ARP COBRA premium subsidy and the related election and notice requirements. We hope these questions will be addressed by future agency guidance. Stay tuned for important updates on this developing law.