ARPA: Subsidized COBRA Coverage and Extensions of ERISA Deadlines

Under the recently enacted American Rescue Plan Act of 2021, some individuals who have lost their jobs or have had their work hours reduced will be eligible for a 100% subsidy for COBRA coverage for the period from April 1, 2021 through September 30, 2021. Pursuant to other federal agency guidance, some individuals also may have an extended deadline for exercising certain rights regarding their health benefits, including an election of COBRA continuation coverage, payment for COBRA coverage, and filing claims and appeals under a health plan.

1. COBRA Subsidy: Overview. Under the American Rescue Plan Act of 2021, “assistance eligible individuals” (as defined in the law) will be able to elect COBRA continuation coverage from April 1, 2021 through September 30, 2021, and these individuals will be treated as having paid the applicable COBRA premium in full. The federal government will subsidize 100% of the COBRA premium by reimbursing an employer or plan through a refundable tax credit.

An “assistance eligible individual” is an individual who is a COBRA “qualified beneficiary”:

Who lost coverage because of the employee’s layoff, termination of employment, or reduction in hours of employment (but not on account of voluntary termination of employment or gross misconduct) and who would have been eligible to elect up to 18 months of COBRA continuation coverage; and

Whose 18 months of COBRA coverage would overlap with the April 1, 2021 through September 30, 2021 subsidized COBRA coverage period.

Under this definition, an individual who loses coverage starting on April 1, 2021 or later will be entitled to subsidized (100%) COBRA coverage from April 1, 2021 through September 30, 2021, unless the individual becomes eligible for other group health plan coverage or Medicare. Also, an individual who previously had a COBRA qualifying event but did not elect coverage, or who elected COBRA coverage but later dropped it, will have another opportunity to elect subsidized COBRA coverage starting April 1, 2021 and continuing until the end of the individual’s 18-month maximum coverage period, if that 18-month coverage period overlaps at all with the subsidized COBRA coverage period. This means, for example, that an individual who elected COBRA coverage starting in November 2019 and later dropped it, or who could have elected COBRA coverage starting in that month, now can elect subsidized COBRA coverage for April 2021, the last month of the individual’s maximum coverage period.

EXAMPLE 1: Jane had benefits coverage under the Fund until she was laid off and lost health benefits coverage on August 1, 2020. She did not purchase COBRA continuation coverage at that time. If she had elected COBRA coverage, she would have been entitled to 18 months of benefits coverage, lasting from August 1, 2020 through January 31, 2022. Jane may now elect subsidized COBRA continuation coverage starting April 1, 2021 and will treated as if she paid the full COBRA continuation coverage premium through September 30, 2021, unless she becomes eligible for coverage under any other group health plan or certain government-provided coverage. Jane also may be able to purchase coverage back to the date that she lost coverage under the extension of the deadline for electing COBRA coverage, discussed below, but she will have to make COBRA payments for all months prior to April 1, 2021.

EXAMPLE 2: Mark had benefits coverage under the Fund until he was laid off and lost health benefits coverage on January 1, 2020. Mark elected COBRA continuation coverage at that time and paid the COBRA premium for 3 months – January, February and March of 2020. Mark then stopped paying the COBRA premium, and his continuation coverage ended on March 31, 2020. Mark may now elect subsidized COBRA continuation coverage starting April 1, 2021 and will be treated as if he paid the full COBRA continuation coverage premium for April, May and June of 2021, unless he becomes eligible for coverage under any other group health plan or certain government-provided coverage. Mark’s entitlement to subsidized coverage ends after June 2021 since his 18-month COBRA continuation period ends then.

We will provide more information on this important topic in the near future with details on the special election and other notices to participants, how to apply for the refundable tax credit and other important information. In the meantime, employers and plans should begin to determine which individuals might be eligible for subsidized COBRA coverage, including individuals whose COBRA coverage period started in November 2019 or later.

2. Extension of Employee Benefit Plan Deadlines. The U.S. Department of Labor (DOL), Treasury and IRS issued “Notice of Extension of Certain Timeframes for Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiary Affected by COVID-19 Outbreak.” The Employee Benefits Security Administration of the DOL issued “Disaster Relief Notice 2021-01.” These two documents provide further guidance on the deadline extensions for COBRA and other affected benefits plans.

Overview: The federal government has extended certain deadlines related to health benefits on account of the national emergency arising out of the COVID-19 pandemic. These deadlines are extended during what is called the “Outbreak Period.”

What is the Outbreak Period? The “Outbreak Period” began on March 1, 2020 and continues until 60 days after the announced end of the COVID-19 national emergency. The end of the COVID-19 national emergency has not yet been announced. Therefore, the Outbreak Period is ongoing at this time.

How Long Will Deadlines Be Extended? Even though the Outbreak Period has not yet ended, the law limits the extension of these deadlines to one year. Because of this one-year limit, any extension of time ends on:

THE EARLIER OF:

one year after the participant was first entitled to relief from a particular deadline;

the end of the Outbreak Period (that is, 60 days after the announced end of the COVID-19 national emergency).

What Rights and Deadlines Are Affected?

COBRA Coverage:
- The 60-day period to elect COBRA continuation coverage
- The date for making COBRA premium payments to the Plan, including late payments
- The date for individuals to notify the plan of a qualifying event or determination of disability under COBRA

Special Enrollment: The 30-day special enrollment period upon loss of eligibility for other coverage and upon certain life events (including birth, divorce, adoption and placement for adoption)

Claims for Benefits: The date to file a claim for benefits (for example, the plan may require that claims for benefits be filed within one year of the date of service)

Claim Appeals: The date to file an appeal of claim denial

External Reviews:
- The date to request an external review of a final claim denial on appeal
- The date to file information to perfect a request for external review

Examples:

For the examples below, assume that the end of the National Emergency has not yet been announced, and therefore the Outbreak Period is ongoing.

i. COBRA Election Period:

EXAMPLE 1:

John reached age 26 on April 22, 2020, and his health benefits coverage under his parent’s plan terminated on May 1, 2020. Under COBRA, a qualified beneficiary generally has 60 days to elect COBRA.

Under the extended deadline, John’s 60-day COBRA election period will not start to run until one year after the loss of health coverage (or the end of the Outbreak Period, if earlier). Therefore, starting on May 1, 2021, John will have 60 days to elect COBRA (that is, until June 30, 2021). If he elects COBRA, his 18 months of COBRA continuation coverage will start, retroactively, on May 1, 2020 and end on November 30, 2021.

If John elects coverage, he will be responsible for premium payments back to May 1, 2020, although the deadline for making such payments is also extended. Although claims may be submitted during the period before John elects and pays for his COBRA continuation coverage, his claims will be suspended, and not paid, until he remits all COBRA premiums due (from May 1, 2020 through the date of his election).

IMPORTANT! Although John is entitled to an extended deadline for electing COBRA coverage, he must elect back to his original COBRA “Qualifying Event” date, and he will have continuous coverage for 18 months from that date. In the example above, the date of John’s Qualifying Event is May 1, 2020. If he elects coverage on or before June 30, 2021, he is electing coverage continuously back to May 1, 2020 and is responsible for all premiums from May 1, 2020. He cannot pick and choose coverage for specific months only.

EXAMPLE 2:

Mary voluntarily quit her job on January 31, 2020, and her health benefits coverage terminated on February 1, 2020. Mary’s 60-day COBRA election period began to run on February 1, 2020, and without an extension of time, she would have had to elect COBRA by April 1, 2020.

Under the extended deadlines, Mary’s COBRA election period stopped running on March 1, 2020, and started to run again on March 1, 2021. Mary has to elect COBRA continuation coverage by April 1, 2021. If she elects COBRA, she will be responsible for premium payments back to February 1, 2020 through the date of her election.

ii. Claim Appeals:

Dana had jaw surgery on June 3, 2020. Her surgeon said the surgery was medically necessary, but the Fund rejected the claim on June 15, 2020 after a determination that the surgery was not “medically necessary” as defined in the Fund’s Summary Plan Description (“SPD”). Dana wishes to appeal the claim denial. The SPD states that she must file a written request for review to the Board of Trustees no later than 180 days after the denial of her claim; otherwise, she will waive her right to appeal the claim denial.

Absent the extension, Dana had to appeal the claim no later than December 12, 2020. However, with the extension, the 180-day period for filing the appeal will begin to run on June 15, 2021 (or, if earlier, upon the end of the Outbreak Period). Dana’s appeal will be valid if filed no later than December 12, 2021.

If you think you might be eligible for an extended deadline with respect to of the rights described above, or you might be eligible for subsidized COBRA coverage, you should contact your health benefits administrator as soon as possible. Of course, we are always happy to answer your questions about these important issues.

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