- Andy Adams
The new ARPA COBRA rules: You are kidding me, right?
I have been waiting for this to be revealed as a very elaborate April Fool's joke, but I have now given up hope that is the case. This is real and it is going to give your HR department night terrors.
The American Rescue Plan Act (ARPA) is the most recent "COVID relief" bill passed by Congress just a few weeks ago. Along with many other provisions, the ARPA provides a 100% subsidy for employer sponsored group health insurance continued under COBRA for eligible individuals. The subsidy will only apply from April 1st to September 30, 2021. The DOL has provided a model notice to be sent to anyone eligible for this COBRA subsidy to be sent by employers no later than May 31, 2021. In addition, the DOL has published a list of FAQs about the COBRA subsidy. However, I will note that the FAQ is written for employees applying for the subsidy. Hopefully, a more thorough guidance for employers will be forthcoming.
The Five Questions We Keep Getting Asked
Rather than cut and paste what is in the model notice or the FAQs, we will attempt to address the five questions we are being asked by our customers currently bleeding through their eyeballs as they read these notices.
Who is eligible?
Every "assistance eligible individual" can get the subsidy That is anyone who is a qualified COBRA beneficiary meeting the following requirements at any point from April 1st, 2021 to September 30, 2021.
Eligible for COBRA due to a qualifying event (reduction in hours or an involuntary termination BUT EXCLUDING voluntary terminations or a termination for "gross misconduct") AND
That want to elect COBRA coverage
You will not be eligible if you are eligible for other group health coverage through a new employer's plan or a spouse's plan or eligible for Medicare.
What is considered "Gross Misconduct?"
COBRA does not define gross misconduct and the new guidance is unlikely to shed further light on what it means. It is NOT a mere violation of company policy or generic poor performance. Courts have generally required that the conduct be intentional, wanton, willful, deliberate, or reckless, or performed with deliberate indifference to an employer’s interests. In addition, it must have a “substantial nexus” to the workplace. Fraud, workplace violence, and other willful conduct will have to be present to meet that standard.
Does this apply to dental and vision benefits?
Yes. The COBRA premium assistance will apply to all group health plans subject to COBRA rules under ERISA. A good rule of thumb is that if you could buy COBRA coverage before, the premium assistance will apply to it.
Does the premium assistance apply to dependent coverage?
Yes. The premium assistance will apply to BOTH employee premiums and dependent premiums. Of course, that is just for the period between April 1st and September 30th. Even though an employee eligible for COBRA did not previously elect to purchase dependent coverage, they may do so now and receive the premium assistance for the dependent coverage.
How long with they be covered by COBRA if they take the premium assistance?
The ARPA premium assistance will not extend the period of COBRA coverage beyond what they would have been eligible to have under the normal COBRA law. So, if an employee was terminated in January 2020 (i.e., became eligible for COBRA in January 2020) and even if he did not elect COBRA at that time, it appears he may now elect COBRA and receive premium assistance starting April 1st, BUT his premium assistance will terminate along with his COBRA coverage once his 18 months has expired (at the end of June 2021) assuming he is not eligible for any extensions. I am guessing that you just read the previous sentence and thought, that cannot be possible. Be my guest to have a look at the FAQ and let me know if I missed anything. This is a remarkable mandate.
I keep waiting for someone to wake me up and tell me that this was just a bad dream. It has not happened yet, so I assume this is real. We are doing our best to understand the new requirement and welcome any critiques which will be updated to the extent we receive any.
The main heavy lifting for your HR department right now is to determine who receives these new COBRA notices. Basically, this means any employee involuntary terminated after October 1, 2019 (see Q3, page 6 of the FAQ). You must provide the model notice to them within 60 days following April 1, 2021 (May 31, 2021). That is your first step.
We are hoping that the DOL will offer more guidance than just the FAQ they produced for eligible recipients this week. Employers will be responsible for paying all the premiums up front, but then will be able to credit those payments in way we presume to be similar to last year's COVID related sick leave rules.
Hopefully, this post will answer some of your questions and provide you with the essential links for resources. As we become aware of new resources, we will update this space. To the extent you need a stress reliever after reading this blog post, please watch this compilation of dog videos: