September 30, 2021, marks the conclusion of the COBRA Subsidy Period, which was introduced by the American Rescue Plan (ARP) Act in March 2021. As we approach the looming expiration date, employers (or health insurance carriers, if the employer is subject to Cal-COBRA) must send one final notice to Assistance Eligible Individuals (AEIs) announcing the conclusion of the subsidy period, along with additional information about alternate health coverage options in October and beyond.
The notice must be distributed 15-45 days before the expiration of the COBRA subsidy, which is September 30th for many. This means that employers (subject to federal COBRA law) must generally distribute the “Notice of Expiration of Period of Premium Assistance” to AEIs between August 16, 2021, and September 15, 2021, for all AEIs with a COBRA subsidy concluding on September 30, 2021. Carriers in the Cal-COBRA category must generally do the same.
Federal COBRA vs Cal-COBRA
Generally, employers with 20+ employees are subject to Federal COBRA if they sponsor a health plan. Employers in the federal COBRA category are responsible for 100% of COBRA administration, and commonly utilize COBRA Third Party Administrators (TPAs) to aid with compliance and administration. Employers in the federal COBRA category are responsible for creating and distributing all COBRA notices, including notices related to COBRA subsidies.
Employers domiciled in California with fewer than 20 employees are generally subject to Cal-COBRA if they sponsor a health plan. Unlike federal COBRA, Cal-COBRA is generally administered by the health insurance carrier. Thus, carriers are generally responsible for distributing COBRA notices and collecting payment under Cal-COBRA.
Many other states, including Nevada, do not have mini-COBRA continuation laws for employers with less than 20 employees.
A model form is available for employers to use to meet this requirement.
The Department of Labor (DOL) has released a model notice that employers may use to meet this important notification requirement. To use the model notice properly, the employer must fill in the blanks with appropriate plan information including the cost of COBRA premium(s) effective 10/1, which the AEI will be responsible for once the subsidy is no longer available . . . that is, if the AEI decides to continue coverage via COBRA beginning in October (if available).
The form must be distributed to any AEI receiving premium assistance, whenever the subsidy ends – unless an AEI is disqualified in the middle of the subsidy period because he/she/they become(s) eligible for another group health plan or Medicare.
What information does the notice contain?
The notice informs the recipient of the purpose of the document, how long COBRA coverage will last if the person decides to continue it beyond 9/30 (and how much that coverage will cost), and other options besides COBRA continuation. These items will vary from person to person, depending on when the person first became eligible for COBRA continuation and the cost of insurance premium(s).
The document explains that an AEI may be eligible for a “Special Enrollment Period” (SEP) on his/her/their state exchange (Covered California, Nevada Health Link, etc.) for individual coverage once the subsidy ends. If the SEP is available, the person will have 60 days to apply for individual coverage upon the exhaustion of the COBRA subsidy. The document also explains high-level basics of Medicaid (called “Medi-Cal” in California), which is a free health insurance programs for individuals who earn up to 138% of the Federal Poverty Level in (FPL) California and Nevada. A handful of states cap Medicaid eligibility at 100% of the FPL.
The document also outlines some high-level FAQs, such as a person’s inability to re-enroll in COBRA coverage once it’s been dropped for an Individual Plan on the exchange, possibilities for enrollment in other group health plans, and enrollment in Medicare.
Lastly, the notice recommends that the recipient consider several factors when deciding the best health plan options for themselves and their families, including: premiums, provider networks, drug formularies, employer severance payments (if applicable), service areas, and cost-sharing (deductibles, coinsurance, etc.).
The form is relatively straightforward for the employer or carrier to complete; however, each person’s form will be different according to the coverage maintained, costs, and COBRA availability moving forward. Each form must be customized, and must accurately represent the AEI’s situation in order to comply with this notice requirement.