COBRA ARPA Subsidy: What Employers Need to Know

If you are an employer who offers employee benefits and have terminated individuals, or if you have had employees with a reduction of hours within the last 17 months, it is important to learn more about the COBRA provisions of The American Rescue Plan Act of 2021. President Biden signed ARPA into law on March 11, 2021 and it provides a 100% COBRA subsidy for certain individuals, referred to as “Assistance Eligible Individuals” (AEI) beginning on April 1 through September 30, 2021, and it is important that you are aware on how it may affect your business.

What is COBRA?
Before we dive into the new legislation and how it affects employers and eligible participants (also referred to as “qualified beneficiaries”), it is important to briefly explain “What is COBRA?” COBRA is a federal law that requires employers to offer continuation of their health and welfare benefit plans if the employee has a qualifying event, such as termination or reduction of hours. If the individuals accept COBRA, he/she traditionally will pay 102% of the premium for elected coverages and can have continuation of coverage up to 18-36 months, depending on the situation. COBRA is generally administered by the employer or outsourced to a third-party administrator.

Some states have “mini-COBRA” laws, such as Cal-COBRA, which applies to employers with 2-19 employees. Not all states have mini-COBRA laws. If an eligible participant elects Cal-COBRA, he/she will traditionally pay 110% of the premiums for elected coverages. Cal-COBRA is generally administered by the carrier. We are awaiting further guidance on the implications of ARPA on the mini-COBRA administration.

Who is Eligible for the COBRA Subsidy?
Based on information found on the Department of Labor website and a page created specific to the COBRA subsidy, only certain “Assistance Eligible Individuals,” referred to “AEIs” are eligible for the COBRA subsidy and they may include:

• Individuals who were involuntarily terminated or had a reduction of hours, therefore no longer eligible for coverage during the subsidy period of April 1 through September 30, 2021.
• Individuals who were involuntarily terminated or had a reduction of hours, who previously did not elect COBRA or allowed their COBRA to lapse, and who have not exhausted their maximum 18 months of coverage. These individuals will have a “second chance” to elect COBRA.
• Includes spouse and dependent children, who are qualified beneficiaries.

There are individuals who are NOT eligible for the COBRA subsidy and may include:

• Individuals who voluntarily resigned employment.
• Individuals who are eligible for other group coverage, such as a new employer’s group plan or spouse’s group plan.
• Individuals who are eligible for Medicare.
• Individuals who have used the maximum period of COBRA coverage.
• If an employer cancelled their group plan, there is no COBRA subsidy available.

The COBRA subsidy is NOT automatic. Individuals who are eligible, who previously did not enroll in COBRA or Cal-COBRA must elect within 60 days of the notice from the group’s plan administrator. The group administrator must provide the notice no later than May 31, 2021. If the AEI does not elect COBRA within the 60-day period upon notification, the subsidy is forfeited.

Who is paying for the COBRA subsidy?
• If the employer has 20 or more employees, either fully insured or self-funded, the employer is responsible for the 100% COBRA subsidy and the 2% COBRA administration fees.

Tax credits will be issued to the employer or the insurer, against the quarterly Medicare taxes. If the credit exceeds the premium, a refund will be available. There is a provision of the law that limits the ability to take the tax credit for premium subsidy if the employer is also taking the tax credit for qualified health plan expenses under FFCRA paid leave provisions or Employee Retention Credit under the CARES Act. We are awaiting more guidance from the IRS on the mechanics. There will not be any “double dipping.”

Penalties for non-compliance
The Department of Labor will be monitoring for compliance on The American Rescue Plan Act.

• Employers may be subject to an excise tax under the Internal Revenue Code for failing to satisfy the COBRA continuation coverage requirements. This tax can be as much as $100 per qualified beneficiary, but not more than $200 per family for EACH DAY the employer is in violation of the COBRA rules.
• Individuals who become eligible for other group health plan coverage or Medicare are required to notify their plan administrator. If they do not notify the plan administrator, the penalty can be the greater of $250 or 110% of the amount of the subsidy. However, regulations state that a person will not be subject to a penalty if the failure to notify the employer/health plan is due to reasonable cause and NOT due to willful neglect.

What are the Next Steps for An Employer?

1. Identify individuals who have been terminated or had a reduction in hours since October 2019.

2. Make sure you have employee records and documentation for your voluntary vs. involuntary terminations, as this makes a difference with COBRA subsidy eligibility.

3. New Model Notices and FAQ were released on April 8 for COBRA by the Department of Labor and can be found on the DOL.gov website.
a. General Notice and Election Notice
b. Notice in Connection with Extended Election Period
c. Alternative Notice (special notice for mini-COBRA/Cal-COBRA)
d. Notice of Expiration of Premium Assistance – NEW
e. Summary of the COBRA Premium Assistance Provision

4. If you outsource your COBRA administration, coordinate with the TPA to ensure the notices are sent to qualified beneficiaries.

5. Make sure you properly reinstate the participants electing the COBRA subsidy with the carriers.

6. As of April 15, 2021, it is still unclear how the employers with Cal-COBRA new alternative mini-COBRA notices will be distributed, as Cal-COBRA is generally administered by the carriers. We are awaiting further regulation and details from the carriers. Stay tuned as more information becomes available.

If you are an employer offering group health benefits, it is important to take the time to make sure your group plans are compliant with the new COBRA provisions under the new law, The American Rescue Plan Act of 2021. Make sure the proper, NEW model notices have been updated and distributed, and make sure you document, document, document!

If you have any questions regarding The American Rescue Plan Act and the COBRA subsidy, please contact MNJ Insurance Solutions at (714) 716-4303 for more information.

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

The American Rescue Plan Act of 2021: COBRA Model Notices

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021, which provides 100% COBRA subsidies for certain individuals beginning on April 1, 2021 through September 30, 2021. Limitations may apply.

On April 7, 2021, the Department of Labor released guidance and the NEW required model notices that determine how the COBRA subsidies will be administered and Frequently Asked Questions.

The DOL’s Employee Benefits Security Administration posted the following:

COBRA Premium Subsidy dedicated page
Frequently Asked Questions
• Five Model Notices:

1. General Notice and Election Notice,
2. Notice in Connection with Extended Election Period,
3. Alternative Notice for State Continuation,
4. Notice of Expiration of Premium Assistance, and
5. Summary of the COBRA Premium Assistance Provisions

MNJ Insurance Solutions will continue to provide updates regarding this topic, as it becomes available. Please contact MNJ Insurance Solutions for more information at (714) 716-4303.

CA UPDATE: Commissioner Lara issues Order resulting in workers’ compensation premium savings for California businesses affected by COVID-19

FOR IMMEDIATE RELEASE:
June 17, 2020
MEDIA INQUIRIES ONLY:
Michael Soller or Byron Tucker: 916-492-3566 916-661-0556 cell
Email inquiries: cdipress@insurance.ca.gov

Commissioner Lara issues Order resulting in workers’ compensation premium savings for California businesses affected by COVID-19
Commissioner’s action mandates workers’ compensation carriers reflect reduced risk of loss in premiums due to “stay-at-home” orders

LOS ANGELES, Calif. — Insurance Commissioner Ricardo Lara today issued an Order adopting emergency workers’ compensation regulations in response to the COVID-19 pandemic. These new regulations will mandate insurance companies to recompute premium charges for policyholders to reflect reduced risk of loss consistent with Commissioner Lara’s April 13 and May 15, 2020 Bulletins, and will result in savings for many policyholders as businesses continue to struggle financially during the COVID-19 pandemic.

“California’s business owners have been hit hard by COVID-19,” said Commissioner Lara. “Workers’ compensation premiums should reflect that many employees are performing less risky duties, and my Order will provide some financial relief for employers when they need it most.”

Under these emergency regulations, employers are permitted to reclassify an employee if the employee’s duties have changed to a clerical classification that has reduced risk than the employee’s previous classification. This reclassification will reduce the employer’s premiums for employees who are a lower risk because they are now working from home even though they may not have previously done so. This change would be retroactive to March 19, 2020, the first day of the Governor’s statewide stay-at-home order, and conclude 60 days after the order is lifted.

“We applaud Commissioner Lara’s efforts to meet the needs of California’s small businesses as they continue to navigate the COVID-19 crisis,” said Mark Herbert, Vice President, California for Small Business Majority. “These new rules will allow small business owners to correctly reclassify their workforce if their duties have changed, helping businesses keep more money in their pockets as they respond to a decline in revenue and adapt their business models. These rules will also ensure small businesses are better positioned for the long-term by protecting them from future increases in workers’ compensation premiums due to COVID-19. This kind of smart action will ensure our state’s job creators and innovators have the tools they need to succeed after this crisis.”

These emergency regulations also exclude from premium calculations the payments made to an employee, including sick or family leave, while the employee is not performing duties of any kind for the employer. Typically, these payments would be used as a basis for the employer’s workers’ compensation premium. This change will lower the employer’s rate by reducing the amount of payroll assessed, and the employer will not pay premium for paid workers who are otherwise being furloughed.

“These changes provide clarity to employers while helping to share any financial costs of work-related COVID-19 cases among all employers—not just those who found themselves at the center of the epidemic,” said Mitch Steiger, Advocate for the California Labor Federation, who is also a member of the Workers’ Compensation Insurance Rating Bureau (WCIRB) Governing Board. “In doing so, both workers and employers most affected by this crisis can more quickly begin the process of recovery.”

This new regulation will also exclude claims related to a COVID-19 diagnosis from being included in future rate calculations so that employers are not penalized with higher rates due to COVID-19 claims.

Insurers will also be required to report injuries involving a diagnosis of COVID-19 which will allow the Commissioner’s statistical agent—the WCIRB—to keep track of COVID-19 injuries, and will aid in the WCIRB’s future analyses of the workplace and market impacts.

The new regulations will go into effect on July 1, 2020.

# # #

Media note:
Link to Commissioner’s Decision and Order

Insurance Carriers’ Responses to COVID-19

We recognize this is a challenging time for everyone and MNJ Insurance Solutions remains committed to be a resource to those we serve, our clients, our prospect clients, our business partners, our insurance carriers, and our communities.

We continue to monitor the spread of COVID-19 and the impact around us.  One of the most common questions that we are receiving from our clients is “How are the insurance carriers covering COVID-19?”

Use the links below for Frequently Asked Questions, resources, and more information on how our carriers are covering COVID-19:

Our work does not stop in light of this pandemic and our team is here to answer your questions and help with you and your employees’ insurance needs.  Contact us at (714) 716-4303 if you have any questions regarding your health insurance plans and COVID-19 and we will do our best to help find solutions.

Disclaimer:  Information is subject to change at any time.  For the most current information on COVID-19 and recommendations on how to protect yourself and others during this pandemic, please visit the CDC for more details.

President Trump Announces National Guidelines to Limit Coronavirus Spread

On Monday, March 16, 2020, President Trump held a news conference to reinforce guidelines intended to slow the spread of COVID-19. He asked Americans to follow the guidelines for the next 15 days:

  • President Trump and his advisors now say to avoid social gatherings and if needed, limit gatherings to under 10 people (down from the “under 50 people” recommendation days earlier).
  • Trump emphasized the importance of self-isolation during this critical time. It was recommended children should be schooled at home, and employees should work from home.
  • Continue to wash your hands, cover your mouth when coughing or sneezing, and create social distancing of 6-feet.

This isolation strategy will hopefully contain individuals who may be carrying the virus and are not aware of it. The administration acknowledged the prevalence of young, healthy individuals without severe symptoms have been unknowingly spreading COVID-19 and want to prevent further spread of the virus.

Unfortunately, no one can be certain how long this pandemic will last. When prompted, Trump suggested the virus may “wash through” the country by July or August, if the administration’s proposed guidelines are followed.

Stay tuned for more updates from MNJ Insurance Solutions about this ongoing pandemic.

Practical Tips for Employers & Employees: Coronavirus Pandemic

In uncertain times such as these, employees are looking for guidance wherever they can find it. Listed below are practical tips Employers can help calm some of their employees’ fears by taking the following actions:

  • Communicate the future of the business with employees in meetings, on the company intranet site, in newsletters.
  • Educate employees that there are cyber criminals that may prey on individuals during times of panic and hardship.  Be careful of cyber scams.
  • Be empathetic in your communications, as every employee’s situation may be different.

 

In these uncertain times, it’s imperative that you communicate your business’ plans as frequently as possible. While it is impossible to control the pandemic, it is possible for you to help ease the stress your employees are experiencing.

For additional employee communications or resources regarding the COVID-19 pandemic, contact MNJ Insurance Solutions.

California Individual Mandate Returns in 2020

Beginning in 2020, California imposes a state individual mandate that requires individuals in California to maintain health coverage or pay a penalty. The California law largely mirrors the federal individual mandate requirement under the Affordable Care Act (ACA) that was effectively eliminated, beginning in 2019.  California’s individual mandate requires most individuals in the state (and their family members) to be covered under minimum essential coverage for each month of the year, beginning in 2020.

Similar to what we saw in the past with the ACA individual mandate, California’s individual mandate penalty is calculated in the same manner. The penalty is the greater of two amounts, the flat dollar amount ($695) or the percentage of income amount (2.5% of income).

For a limited time, you can still sign up through April 30, 2020 but you’ll have to enroll quickly to avoid paying the penalty.

You have until April 30, 2020 to apply if you just learned about the new financial help available to almost 1 million Californians or the new state penalty for not having insurance. You can still apply even if you already have coverage through a company like Kaiser Permanente, Blue Shield, Health Net or any other plan outside of Covered California. After you enroll, your coverage will start the first day of the next month, but April 30th is a firm deadline, unless you have a qualified event/special enrollment period.

Let us know if you have any questions or need help applying for Health Insurance coverage.

The PACE Act and What it Means to California Employers: October 2015

President Obama has signed into law the Protecting Affordable Coverage for Employees (PACE) Act.  On September 28, 2015, the House of Representatives passed H.R. 1624 through voice vote and on October 1, the Senate passed the legislation through unanimous consent.

 

How Will PACE Act Affect the Affordable Care Act (ACA)?

Small group is currently defined as employers with 2-50 employees.  As of January 1, 2016 under the ACA, the definition of small group was set to expand 1-100 employees.  The PACE Act repeals the mandated small group expansion and it gives the individual states the flexibility to determine the small group market definition, rather than being forced to the national standard.

Several states, including California, have already enacted legislation that expands the small group market definition to 100 employees.  However, for those states that have not taken any action to date regarding the definition of small group, we are awaiting confirmation form the departments of insurance and legislators as to whether the states will accept the new federal standards or if they will take action of their own to expand the small group market definition of up to 100.

 

How Does PACE Affects the California Employer?

Unless further guidance is issued by California, we are moving forward with the small group expansion for employers with 1-100 employees with new business or renewals beginning January 1, 2016.  For employers who have 51-100 employees, there will be significant changes in their benefits, rating, and administrative process.  The most significant changes will be as follows:

  •  Rates in small group are age-banded, whereas large group premium rates are composite rates.  In age-banded rates, older employees pay a higher premium than younger employees.
  • ACA rates in small group are “member-level” rating (also known as “community rating”), whereas large group premium rates have a family rate for the plan, regardless of number of dependents.  With member-level rating in small group, larger families will pay a significantly higher premium as they are individual rated (some limits apply).
  • Small group plans are required to cover the 10 Essential Health Benefits, including pediatric dental and vision.
  • Small group plans are required to meet specified actuarial values +/- 2 percent (60%, 70%, 80%, or 90%, also referred to as the metal tiers), whereas large group plans can provide any actuarial value as long as they meet the minimum value of 60% requirement.

 

Action Items for Employers with 51-100 Employees:

  • Evaluate your plan  options in 2015.
  • Consider an Early Renewal option.
  • Market alternative carriers for 11/1 or 12/1/15 effective dates or extended renewal periods.
  • Compare current composite rates to age-banded, member-level rates in 2015 to see how the new rating will impact your company.
  • If you are an employer with 50 or more full-time equivalent and do not currently have coverage, evaluate your plan with a 2015 effective date versus age-banded rates in small group.

 

Please contact MNJ Insurance Solutions at (714) 716-4303 for more information.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

Help…I Lost my Job…Should I Take COBRA or an Individual Policy?

COBRA is a federal law that requires employers of 20 or more employees with group health plans to offer employees, their spouse and dependents a temporary period of continued health care coverage if they lose coverage through the employer’s group health plan.  Employers who have not continuously had 20 employees are covered if they had at least 20 employees on more than 50% of  the typical business day in the previous calendar year.  Both full-time and part-time employees are counted to determine whether the plan is subject to COBRA.

 

Individuals are not obligated to participate in COBRA after leaving an employer or having a reduction in hours.  However, if an individual declines the initial offer of COBRA, he/she may qualify for “special enrollment” in Covered California health insurance or an “off-exchange plan” outside of the annual Open Enrollment period for Individual/Family coverage.  An “off-exchange plan” are plans that are offered by the carrier direct, rather than through Covered California.  In order t take advantage of the special enrollment in Covered California or “off-exchange plan,” the individual/family losing group coverage must apply for coverage no later than 60 days after their employer-sponsored plan ends.  It is also important to note that if an individual were to terminate their COBRA coverage during Open Enrollment of Covered California or elect an off-exchange plan, he/she cannot change their mind to go back to COBRA.

 

If an individual were to elect COBRA and loses his/her coverage (i.e. due to non-payment), he/she will NOT be eligible for special enrollment through Covered California, nor opt to an off-exchange individual plan at that time.  Outside of Open Enrollment, individuals qualify for special enrollment with Covered California or off-exchange individual plans if one of the following apply:

  • If former employer was responsible for remitting payments for the COBRA premium and fails to do so in a timely manner, therefore participant is cancelled due to group non-payment;
  • The COBRA participant moves out of the plan coverage area and there is not another option available (i.e. former employer offers HMO only plan and COBRA participant moves out of state and the HMO would no longer be a good option);
  • If the former employer cancels the group plan, therefore, COBRA is no longer available; or
  • The beneficiary has maximized their COBRA duration available under the plan.

 

Listed below are pros and cons of Electing COBRA vs. Enrolling in Covered California after an individual and qualified beneficiaries have had a qualifying event.

 

PROSCONS
ELECTING COBRA
  • The network of doctors and hospitals available in each plan and individual can continue the current benefits.
  • Covers more Rx than individual plans.
  • Transition and electing COBRA is typically an easier process than enrolling in Covered California.
  • If you are currently seeking treatment or under the care of a physician, it is easier to continue care under COBRA.
  • The total monthly premiums for the individual and qualified beneficiaries (family members previously enrolled on the plans) are paid by individual.
  • If the individual and qualified beneficiaries enrolled in COBRA, they cannot drop their COBRA plan and enroll in Covered California plan unless it is Open Enrollment for Covered California.
  • Depending on the level of benefits previously provided by the employer, the COBRA monthly premiums may be more expensive than desired coverage through Covered California (i.e. if employee or dependents may not need the rich covered previously offered by the employer).

 

ENROLLING IN COVERED CALIFORNIA OR “OFF EXCHANGE PLANS” WITH THE CARRIER
  • Depending on income, the individual and qualified beneficiaries may qualify for tax credit and/or subsidy (depends on household income – chart for 2015) with Covered California.
  • Copays and deductibles may vary with options for Covered California or “off-exchange plans.”
  • Individual has options to move to another carrier (plans for 2015) than what may be provided through their former employer.

 

  •  Doctors and hospitals may not be in the network for the Covered California or “off-exchange” plan option.  It is important to confirm preferred doctors before selecting a plan to ensure they are in the network.
  • Prescription plans offered through Covered California individual plans or “off-exchange” plans often cover a smaller list of formulary drugs than group plans.

 

Note: If you have a qualifying event, your spouse has other group coverage offered through his/her employer, you may also want to explore adding onto their group plan as an additional alternative.  If this is an option through his/her employer, it must be done within 30 days of the loss of coverage.

If you have questions regarding your personal situation, MNJ Insurance Solutions are able to assist and can be reached at (714) 716-4303.

 

More Resources:

COBRA vs. Exchange Coverage – Covered CA

 

Disclaimer:  The views and opinions expressed are those of the author and do not necessarily reflect the official policy or position of Covered California.  Any content provided by our bloggers or author is of their opinion and are not intended to malign any organization, company, government entity, anyone or anything.

This document is for general information only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy or completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice from their own attorneys and tax advisors with respect to their individual circumstances.