THE RECENTLY enacted American Rescue Plan Act of 2021 includes a 100% COBRA subsidy for up to six months through Sept. 30 for employees laid off during the COVID-19 pandemic.
Due to the short ramping up period, it’s imperative that employers who have laid off workers, or who plan to, urgently start preparing to notify them if you have not already done so.
The Consolidated Omnibus Budget Reconciliation Act requires health plans sponsored by employers with 20 or more workers to offer employees and their families the opportunity for an extension of health coverage (called continuation coverage) after they have quit or been laid off for up to 18 months. The workers are usually responsible for the entire premium.
Who is eligible?
Eligible individuals include:
• Workers who were previously laid off or lost their benefits and became eligible for COBRA continuation coverage but chose not to purchase it, as long as they would still be eligible now. Example: A worker who was laid off in November 2020 but rejected the offer of COBRA coverage then.
• Individuals who previously elected COBRA continuation coverage, but later dropped it, as long as they would still be eligible now. Example: A worker was laid off in August 2020, elected and purchased COBRA coverage but dropped the coverage in January.
• Former staff who were involuntarily terminated or experienced a reduction in hours, and who timely elect COBRA continuation coverage after April 1.
Individuals are not eligible for a subsidy:
• If they voluntarily resigned from their job.
• They become eligible for other employer coverage or Medicare.
• They are beyond their maximum COBRA coverage period (which under federal law is 18 months).
The subsidy applies to all health coverage that COBRA usually covers: health insurance as well as dental and vision coverage. Generally, the coverage employers offer Assistance Eligible Individuals should be the same coverage in effect prior to their COBRA-qualifying events.
Individuals who qualify for the COBRA subsidy are not required to pay a premium.
The group health plan will cover the cost of the coverage, which will be reimbursed (including any administrative fee) by the U.S. government via a payroll tax credit.
When notifying newly eligible individuals, the information can be included with the COBRA election notice or a separate notice that would come along with the election packet.
As mentioned, a significant percentage of COVID-19 workers’ compensation claims have been rejected. For example:
- In California, which has a law that extends the presumption that a case was contracted at work for anybody working on-site, 26% of the 93,470 COVID-19 claims filed in 2020 were denied In Texas, which has no presumption for COVID-19, 45% of the 32,000 related workers’ comp claims were denied, despite those workers testing positive.
- In Florida, which has given front-line workers who are state employees a presumption of eligibility, 22% of state employees’ coronavirus-related workers’ comp claims were denied last year, compared to 56% of cases for workers in the private sector. The NCCI also noted that fewer than 2% of COVID-19 workers’ compensation claims cost more than $10,000.
Payouts lower than expected
Another factor is that even COVID-19 claims that were accepted, often did not end up costing the insurers as much as they expected to pay out because the majority of infected workers did not require any hospital stays or treatment.
Insurers also say that many claims were likely never reported in the first place, particularly when workers had mild or no symptoms.
THE NOTICES MUST INCLUDE:
- Notification of the availability of subsidies.
- A description of their right to the subsidy and conditions.
- The forms necessary to establish eligibility.
- A description of the special election period.
- A description of the qualified beneficiary’s obligation to notify the plan when they are no longer eligible for coverage.
- Contact information of the plan administrator or contact.
Important: The Department of Labor has model language for the notices on its website.
What you should do
If your firm is large enough to be covered by COBRA, you should:
- Coordinate with your administrator to ensure that you agree about who should identify eligible individuals and who will be sending out notifications.
- If that is you, identify those individuals who may be eligible for the COBRA subsidy and who may be eligible to make a new election.
- Prepare notification documents.
- Notify all eligible individuals.