Last week Congress passed the American Rescue Plan Act of 2021 (ARPA). There are many items in this law, but there are two specifically that affect Group Insurance Plans we provide to your company. The major changes occur under Federal and State COBRA, listed below is an explanation on how we will be handling this change. The only FSA change in this law is raising the limit for FSA DCAP limit in 2021.
COBRA Subsidy
IMPORTANT – PLEASE NOTE: THIS IMPORTANT CHANGE ONLY EFFECTS YOUR ORGANIZATION IF YOU HAVE 20 or MORE EMPLOYEES AND ARE REQUIRED TO OFFER COBRA.
ARPA allows COBRA Federal and State qualified beneficiaries (QB) to have 100% subsidized COBRA coverage from 04/01/2021 to 09/30/2021. The 100% subsidy is fully covered by the Federal Government.
The following qualified beneficiaries qualify:
- Anyone that was involuntary terminated or involuntary reduction of hours. (The QB would have had to be let go by their employer or reduced hours lead to no benefits where the employee did not choose to reduce hours)
- The QB, if involuntary terminated and has COBRA time left, can get 100% paid-for COBRA.
- No dependent COBRA events qualify. If the COBRA event was for a dependent, they do not qualify for the subsidy.
- There is no increase in COBRA time. The period is still only 18 months.
- Anyone that terminated prior to 11/01/2019 would not qualify.
- If the qualified beneficiary COBRA time ends during the 100% subsidy, their coverage still ends at the end of the 18 months.
- If the qualified beneficiary has not elected nor paid up to 03/31/2021, the QB still qualifies.
- The qualified beneficiary will have to elect now, and they can come back on COBRA starting 04/01/2021 to take advantage of the 100% subsidy.
- The QB DOES NOT have to come back to their original loss of coverage date.
- The QB can stay on for just the 6 months (if the QB has that time left) and then drop off.
- The insurance carrier DOES NOT have to pay for any claims during gap of coverage.
- For example, John Doe was terminated from ABC Company on 12/31/2020 with a COBRA start date of 01/01/2021. John does not elect COBRA. John then gets a letter about the COBRA subsidy and elects to come on starting 04/01/2021. John can elect and come on for 04/01/2021 not having to pay or be covered from 01/01/2021 to 03/31/2021.
What coverage options are available to those that qualify for the subsidy:
- All COBRA coverage; specifically, medical, dental, and vision. FSA do not qualify but integrated
- Qualified beneficiaries can be allowed to change coverage if the group has more than one plan above from the plan they were currently on. It can only be a plan though that is LOWER COST than the plan they are currently on.
- The qualified beneficiary can have 100% coverage paid for employee only, employee spouse, employee child(ren) or family coverage.
- The qualified beneficiary can also add family members to the COBRA coverage with a change of status event.
What do you need to do as an employer?
- Run a payroll report (See attached Census CLICK HERE) of everyone that terminated after 11/1/2019 that had medical, dental or vision benefits prior to termination. Please also indicate if they were involuntary or voluntary terminated from employment.
- Any terminations going forward will need to specify involuntary versus voluntary terminations.
- The Federal Government is also paying all 2% fees, but they will be given to you the employer and should be included i.e. (102%) of current premium
COBRA Notification and Election Period:
The notification language is coming from the Federal Government and they have 30 days to supply the language. We anticipate this date to be around 04/05/2021 as that will be right around the 30-day period for the government language.
Once the qualified beneficiaries receive the new paperwork, they have 90 days to elect.
Call us at 800-362-2809 with questions or concerns. You can also visit us at www.getagreatquote.com