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Part 1: Your Questions about COBRA and The Outbreak Period

Over the past few weeks, we have received many questions regarding the ongoing Outbreak Period and the newly signed American Rescue Plan Act. Our senior Legal Counsel, Michelle Barki, took the time to answer them all for you. This morning during our webinar, we answered general questions, subsidy-related questions, and voluntary versus involuntary termination questions. Next Tuesday, for Part 2, we will discuss Depended Care and Notices. In case you missed it, here are the questions and answers:

General Questions and Answers

Will COBRA members be able to have a coverage gap?

There is a special enrollment right for those who are involuntarily terminated and entitled to the subsidy right for April 1, 2021 - September 30, 2021. It is not contingent on having COBRA coverage before April 1, 2021, and there can be a coverage gap.

What if a group plan was replaced with an employer-subsidized ICHRA?  Does every assistance eligible individual have the right to a 100% subsidized ICHRA?  Will an ALE Employer have to make the affordability contribution for everyone who elects the subsidized ICHRA plan?

ICHRA plans are also entitled to the subsidy.

If an employee canceled their COBRA coverage before the 18 months ended, will these changes allow them to enroll again? The employee termed February 2020 with COBRA effective 3/01/2020.

Yes, there is a special enrollment right just for April 1, 2021 - September 30, 2021, even though there was a coverage gap when they elected and then terminated.

Have the carriers agreed to accept the retro enrollments?

They really do not have a choice. If there are any issues, this will need to be addressed with the carrier. They seem more willing to accept retro-enrollments than they are retro-termination.

Just to clarify, the recently signed bill allows reinstatement just as of 4/1/21 forward, up to the end of their normal COBRA period allowed with six months of subsidy?

That is correct. It will not extend COBRA but, from April 1, 2021 - September 30, 2021, if they are an AEI (Assistant Eligible Individual), they can get the subsidy.  What is not as clear is whether they can continue COBRA after September 30 if they do not retro-pay all premiums.

Will this apply to states that offer continuation for groups smaller than Federal COBRA 20+ employees?

Yes, State Continuation applies.

Is the coverage period back-dated to the original COBRA beneficiary effective date, or is the coverage period just for April 1 - September 30, 2021?

There is a special enrollment date just for April 1 - September 30, 2021. You do not have to be enrolled in COBRA at the time to take advantage of the subsidy.

Does an employee who elected COBRA last year, and is still in their 18 months, receive the subsidy, or is it only for those who elect during the special enrollment period?

If they are still within the 18 months and qualify as an AEI, they would qualify for the subsidy if the QE was an involuntary termination or reduction in hours.

What if the COBRA QE is at the end of FMLA?

If they do not return at the end of FMLA because they are sick and unable to work, this would probably be considered an involuntary termination. Although we do not have any real guidance under ARPA, we did under ARRA in 2009, and we can draw some analogies. Under ARRA, the IRS stated involuntary termination of employment was “a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue to provide services.” Therefore, the question is, was the employee willing and able to provide services? I believe, following the past, failure to return after FMLA could be considered involuntary termination. On the other hand, if the employee gets a new job during or after the expiration of FMLA, that would be voluntary.  In short, there is no one-size-fits-all. See notice 2009-27; we are still awaiting guidance.

If an employee could not return from FMLA in October and was terminated and has COBRA currently, do we now roll them into the subsidy program effective April 1?

Yes, if the termination was involuntary and if they enrolled in COBRA and were not offered other group health coverage or Medicare. The Model notices should clarify this. However, we are still awaiting clarification.

What if the employer discontinued their medical plan due to major layoffs, e.g., for groups under 20 in California, there is the Cal-COBRA with a 10% surcharge? How will that work?

Cal-COBRA counts, and employers would pay COBRA's cost from April 1, 2021 - September 30, 2021, provided the employee takes advantage of the special enrollment period.

How do these regulations apply to Non-ERISA groups?

COBRA subsidies apply to all group plans, including State Continuation. The Outbreak Period is mandatory for ERISA plans and voluntary for governmental plans, although highly encouraged by the Public Health Service Act and HHS.

Which admin would be responsible if the employer has changed vendors during this time?

This is a question for the administrators. Technically, the plan sponsor is the fiduciary. I would hope one of the administrators would step up. At Medcom, if we have a new client and they can get us the past information, we will work with the new client.  The data is key.

If a COBRA participant has already paid their premiums for April, etc., how will they get the refund for the COBRA payment?

The employer would have to refund, and they have 60 days to do so.

If an employee is currently on COBRA but has not made payment and the group moves carriers, does the employer need to allow the employee to enroll with the new carrier even if they haven’t made a payment for several months?

Suppose they are in The Outbreak Period, yes. If this is for the subsidies and within their 18 months, they are entitled to the special enrollment rights.

If an employee who was terminated elected COBRA and had been paying premiums, will they now be instructed they don’t have to pay?

It depends on whether if it was involuntarily termination or reduction of hours. If that is the case, then yes, they will notice the availability of subsidies. Any premiums they paid from April through September 2021 would have to be reimbursed within 60 days.

If the COBRA QB has a new, special enrollment right under COBRA, 4/1/2021-9/30/2021, are they able to randomly elect any start date within that timeline to START their 18 months, or is it reduced?

This is not a restart of the 18 months, but they can elect COBRA during this time and get a subsidy.

What happens if a former employee elects COBRA and we pay it, but it turns out they have other coverage?  Do we get a refund?

You should. Also, part of the subsidy availability notice will be a statement that the employee has an obligation to let you know if they have an offer for other group coverage. If they fail to advise, the penalty is $250. If they intentionally fail to advise, the penalty is $250 or 110% of subsidy, whichever is greater.

Does the participant have to pay retroactive premiums to enroll under the new special OE period? How about adverse selection?

They do not have to enroll retroactively. Adverse selection is a concern, but if they don’t take retroactive coverage, this could also mean they are healthy and did not incur large claims. Only time will tell for this one.

Subsidy Questions & Answers

Who qualifies for the subsidy? Is it all involuntary terms or only those that were involuntarily termed due to COVID?

All involuntary terminations except for gross misconduct, provided they are within their 18 months for any part of the subsidy months.

Are subsidies optional, or are they required?

It is required for AEIs.

Is it the carrier or the employer that pays the subsidy and takes the payroll credit for a fully insured plan?

The employer. In the original bill, it was the carrier for fully insured and employers for self-funded. With the final bill, it was changed to employers for both fully insured and self-funded.

Is a subsidy required for State Continuation?

Yes.

If the terminated employee gets a new job, do we have to continue to provide the COBRA subsidy?

You pay unless they have an offer of coverage for another group plan.  As part of the notice, COBRA participants will be advised on the penalties for failure to advise of group coverage offered.

Does the COBRA subsidy include furloughed workers?

Yes, if they lost coverage and are entitled to COBRA.

If a former employee lost COBRA for non-payment of premium last December, are they now able to pay the premium back to December to have claims covered during that time frame?  Can they then skip January through March and re-enroll in April with a subsidy?

Probably, due to the new Outbreak rules.  They do not have to have COBRA in effect before April 1, 2021, to be eligible for the subsidy.  They must have been involuntarily terminated, and at any point between April 1, 2021 - September 30, 2021, they are in the 18-month period of COBRA coverage.

If someone was terminated for just cause, do they still qualify for the subsidy?

Yes. It must reach the standard of gross negligence not to be eligible. Please consult with your attorney before denying subsidies for just cause.

Would dropping COBRA at the end of the subsidy qualify as a special enrollment for someone to enroll on the Marketplace?

Normally, voluntarily dropping COBRA is not a SEP. Indications are that it will be a special enrollment right at the Marketplace, but we are waiting for further clarification. We are also looking for clarification about whether they continue to pay premiums and continue COBRA after September, even if they did not pay for COBRA before April.

Does the subsidy apply to just medical or all COBRA coverages like dental and vision?

It also applies to dental and vision.

Does the 100% premium subsidy also apply to disabled participants who pay 150% of the cost?

It does not cover any extensions of COBRA beyond 18 months and only for those involuntarily terminated.

Does the subsidy cover just the employee premium or the dependent portion, too?

Dependents and spouses as well if they are qualified beneficiaries and were on the plan prior.

What happens if the carrier does not allow the SEP for the COBRA coverage during the subsidy timeframe?

They should. This was part of the ARPA, so it is the law. I have not had any indication from the National Association of Healthcare Underwriters that this will be an issue. If it becomes an issue, please let us know.

If a group's open enrollment falls between April - September, would a COBRA-qualified participant be able to increase their plan election and still get a full premium subsidy?

No; however, if the employer chooses, they can allow participants to enroll in a lower-cost plan.

Do large group church plans need to provide subsidies?

Yes, if they chose to be covered under ERISA or part of State Continuation. If they are generally not covered under COBRA or State Continuation, they would not be eligible.

Does the subsidy apply to someone who has coverage elsewhere, e.g., someone who was involuntarily terminated due to COVID layoffs, since got another job, and has an offer of coverage?

Once they have another group plan offer, regardless of whether they took the coverage, they are not eligible for the subsidy.

Involuntary/Voluntary Questions and Answers

Are the Qualifying Events of involuntary termination and reduction in hours exclusively if due to COVID RIF, layoffs, furloughs, and other re-organizations due to the economic impact of COVID?

No, if they were involuntarily terminated or had a reduction of hours for any reason, they are entitled to the COBRA subsidy.

How will the new election period rule under ARPA dovetail with the "pause" on COBRA deadlines announced on February 26 (the individual QED rule for the 12-month maximum period)?

You must keep them separate. The Outbreak Period allows all those covered under ERISA. Depending on the public entity, it is voluntary to pause their election period for one year unless the National Emergency ends and The Outbreak Period ends 60 days later.  So, we look at the earlier date. The ARPA is for employees who were involuntarily terminated or had a reduction in hours. They have a special enrollment right to get COBRA subsidies if they would have been eligible for COBRA between April 1, 2021 - September 30, 2021. They do not have to have COBRA coverage before April 1, 2021, and those gaps in coverage are still eligible.

If a reduction in hours was voluntary and the now part-time individual is still employed but not benefits-eligible, does the ARPA allow for a subsidy?

Yes, unless advised otherwise, the individual does not have to have an involuntary reduction. My thoughts on this have changed in reading the bill.

Would you need us to provide termination information for our employees who were involuntarily terminated? If so, by when?

For those that have clients with Medcom Benefit Solutions, more information is coming. Just understand, notices must be out no later than May 31, 2021.

Does the voluntary layoff have to be due to the pandemic, or can it be for a just cause?

It can be for just cause.

Are employees who were terminated for not following procedures or fulfilling employment obligations eligible, e.g., being fired for excessive tardiness?

Yes, the only exception is gross negligence. Always check with your lawyers first as this is a high standard; it is not a performance issue.

 

Next week we will answer the remaining questions on Depended Care and Notices.