Simply Business: COBRA Premium Subsidy

In this episode of Simply Business, Barron Guss talks with Lori Rego, the Director of Benefit Services at ALTRES, to unpack what the COBRA premium subsidy means for individuals and employers in Hawaii.

Listen to the podcast here:

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, was passed in 1985 and requires certain employers to offer employees and their family members who lost health insurance a temporary extension of coverage. Individuals who choose continued coverage through COBRA are responsible for paying up to the full cost of the premium plus a two percent administration fee.

How did COBRA benefits change due to COVID relief legislation?

After the CARES Act passed in 2020, suspended certain COBRA-related deadlines, such as the deadline to elect and the deadline to make payment.  The relief continues until 60 days after the announced end of the COVID-19 National Emergency.  This means that employees could opt into COBRA for up to a year after losing health insurance coverage, an extension from the previous 60-day election window.

The 2021 American Rescue Plan Act included the COBRA premium subsidy, which made substantial changes outlined below.

What does the COBRA premium subsidy mean for individuals?

Those who qualify as Assistance Eligible Individuals (details below) now have a new opportunity to enroll in COBRA coverage, regardless of previous participation, at no cost. Qualified individuals are eligible for coverage from April 1, 2021, through September 30, 2021.

The cost of COBRA coverage from April through September will be paid by the employer. Employers are then eligible for a tax credit from the Federal government.

Who qualifies as an Assistance Eligible Individual (AEI)?

Qualified beneficiaries (QB) whose COBRA-triggering event was an Involuntary End of Employment or Reduction of Hours, where loss of coverage occurred between October 2019 and August 2021, and where the following statements are also true:

• QB is NOT eligible for any other employer group health insurance
• QB is NOT eligible for their spouse’s employer group health insurance
• QB is NOT eligible for Medicare
• QB HAS submitted a COBRA Election form and Request to be Treated as an AEI form

Which employers are subject to COBRA?

Private-sector businesses who had at least 20 employees on more than 50 percent of its typical business days in the previous calendar year.

Employer Responsibilities

• Identify individuals you believe will qualify as an AEI (based on above criteria)
• Notify those individuals about the extended election period no later than May 31, 2021
  • Include COBRA Election form
  • Include Request to be Treated as an Assistance Eligible Individual
• Collect completed forms from AEI’s
• Work with your carrier(s) to enroll these individuals and/or designate them as subsidy eligible
• Pay the COBRA Subsidy premiums to your carrier(s)
• Notify AEI’s that their subsidy is ending (notification to be sent no later than 15 days prior to end of the subsidy and no sooner than 45 days prior to the end of the subsidy)
• Take the appropriate tax credit on your next 941 tax filing

Model Notices

The Department of Labor issued model notices employers can use when corresponding with Assistance Eligible Individuals. Lori recommends employers use the language exactly as written in the model notices to ensure compliance.

All of these below model notices can be found on the U.S. Department of Labor – COBRA Premium Subsidy website.

• Model General Notice and COBRA Continuation Coverage Election Notice – Use this form for the remainder of the subsidy period for employees losing coverage.MS Word | PDF
• Model Notice in Connection with Extended Election Period – Use this form to notify employees who lost coverage previously for a qualifying reason that they have a new opportunity to elect COBRA.MS Word | PDF
• Model Alternative Notice – Use this form if you plan to offer individuals the opportunity to switch plans upon election (not required). MS Word| PDF
• Model Notice of Expiration of Premium Assistance – Use this form to notify individuals who did elect that their subsidy is ending. MS Word| PDF
• Summary of COBRA Premium Assistance Provisions (includes Request to be Treated as an AEI) – Provide this notice and form to all potential AEI’s. MS Word| PDF

More clarification about Assistance Eligible Individuals and employer requirements.

Watch the full video (above) for more discussion regarding:

• 14:50 – Potential for an extension of the COBRA premium subsidy
• 18:42 – Potential abuses of the program
• 20:30 – Frequently asked questions from employers including documentation to qualify for the tax credit

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Have a question for our HR experts?  Contact simplicityHR to learn more about the advantages of having our team of professionals on your side as you navigate the American Rescue Plan Act and the COBRA premium subsidy.