COBRA Subsidies Included in Latest Stimulus Proposal

Group health plan sponsors and administrators may soon need to introduce changes to their offer of continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The House Education and Labor Committee has proposed temporary COBRA subsidies and other modifications as part of the current COVID-19 stimulus package that is working its way through Congress. If included in the final bill, these changes could take effect as early as April 1, 2021.

Reduced COBRA Premium

The proposal would allow workers who are eligible for COBRA due to involuntary termination or reduction in hours to receive coverage under their employer-sponsored group health plan with a premium reduction of 85 percent. This premium reduction would apply to the period beginning on the first month after the enactment date of the act, and ending on September 30, 2021. However, it will not apply if the individual is eligible for other medical coverage (not included limited types of medical coverage, such as dental or vision benefits or coverage under a health flexible spending account) or Medicare. Health plan sponsors will be able to recover the remainder of the COBRA premium through credits against their employment taxes.  Individuals who are inappropriately denied the premium tax credit may file claims with the applicable governmental agency and receive expedited review.

Plan enrollment option

Under the proposal, an employer may permit individuals eligible for the COBRA premium discount to elect to enroll in a different coverage option sponsored by the employer.

In order to elect to enroll in different coverage, the following requirements must be met.

• The premium for the different coverage must not exceed the coverage for which the individual was originally enrolled;
• At the time of the election, the different coverage must also be offered to similarly situated active employees; and
• The different coverage elected must offer more than just limited health coverage.

Extension of Election Period

The proposed act also sets forth an extended election period to allow individuals who previously experienced a qualifying event to enroll in coverage. This extended election would apply to (1) individuals who do not have COBRA coverage in place for the first month beginning after the date of enactment of the act, but who would have been eligible had they elected; and (2) individuals who elected COBRA coverage but discontinued such coverage before the first month beginning after the enactment of the proposed act.

Employer Notice Requirements

The proposed act requires employers to provide clear written notices on various topics including, but not limited to, the availability and expiration of premium reductions; the option to enroll in different coverage (if available); and extended election periods. Penalties may apply if appropriate notice is not provided, particularly for a failure to provide notice about the end of any premium subsidy. The government is to develop model notices that may be used for these purposes.

Attorneys in Ballard Spahr’s Employee Benefits and Executive Compensation Group will continue to closely monitor the progress of this bill and are prepared to advise employers and plan sponsors on what it may mean for their group health plans when and if it becomes law.

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