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Friday, 23 April 2021 16:39

Action Needed on ARPA's COBRA Provisions

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During the past month we have been fielding all sorts of questions regarding the 100% premium subsidies for COBRA coverage for Assistance Eligible Individuals (AEIs) under the American Rescue Plan Act (ARPA). One of the biggest misconceptions is that employers who have a TPA that handles their COBRA administration might believe that they don’t need to do anything. This is absolutely FALSE.

Who Qualifies?
Many COBRA TPAs do not know whether employee terminations were involuntary or voluntary, and often that is not data they capture. It is up to absolutely every employer subject to COBRA (or State Continuation for that matter) to go back and audit to identify any involuntary terminations, and any reductions in hours – both voluntary and involuntary.

How Far Back Do I Need to Audit?
The employer should audit all the way back to October 2019, for a November 1, 2019 COBRA effective date. Individuals who were first eligible for COBRA on November 1, 2019 would have their 18th month of COBRA fall in April of 2021, which is the first month of the new subsidies.

What Will the TPAs Need from Me?
The TPAs will probably be providing the Notices to AEIs, but will likely require employers to identify who the AEIs are. Please check with your TPA if they have not notified you. If an employer does not have a TPA for your COBRA administration, the employer must identify AEIs and send out the notices themselves.

A Few Other Things to Remember:

  • AEIs do not have to have been enrolled on COBRA for any of the time up until the subsidy starts. ARPA created a new election window and they can elect prospectively starting April 1, 2021.

  • AEIs do not have to elect retroactively to their original COBRA eligibility date, or pay any back premiums.

  • If an AEI is eligible for a new employer’s plan, or a spouse’s plan, or Medicare, they will not be eligible for this COBRA assistance.

  • Premiums for State Continuation in Colorado will be paid by the carriers and they will claim the tax credit as well, so smaller employers not subject to COBRA do not have to deal with those logistics. They WILL still likely need to audit to let the carriers know who the AEIs are that they must notify.

  • In most instances, domestic partners will not qualify as AEIs and the COBRA subsidies will not apply to them, since the IRS does not recognize them as COBRA-eligible.

  • Dental and Vision premiums will also be eligible for assistance, as will Health Reimbursement Arrangements (HSAs) and plans other than Flexible Spending Accounts (FSAs).

We recommend to employers that haven’t begun to track AEIs back to October 2019 to start ASAP. If you need further guidance on these matters, please contact your Fall River Client Manager, or reference Alera's COBRA Subsidy Quick Facts or Whitepaper.

Read 637 times Last modified on Monday, 10 May 2021 12:41
Kristen Russell

Kristen founded Fall River Employee Benefits as the culmination of her insurance industry career as an actuary, underwriting executive & consultant. As an Assistant Vice President at Great-West Healthcare (now part of CIGNA), she managed a $1 Billion block of health insurance. She also worked as a Senior Consultant at Reden & Anders, consulting to insurance companies and large employers throughout the country. Ms. Russell received a Bachelor of Science, Business Administration in Actuarial Science, is a member of the American Academy of Actuaries and achieved Fellowship in the Society of Actuaries through a rigorous nine-year series of exams.

Kristen grew up in Iowa but has lived in Colorado since 1993, currently living near our office in the Lower Highlands neighborhood near downtown Denver.  She enjoys bicycling, hiking, traveling and has a special passion for non-profit volunteering. She is married to an incredibly talented photojournalist, has two adult stepdaughters and an adorable Border Collie/Lab mix named Chaco.