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CAL COBRA / Federal COBRA changes
The American Recovery Plan (ARP) Act was signed into law in March 2021, establishing some of the most significant changes to the employee benefits industry since the inception of the Affordable Care Act (ACA) – particularly in the COBRA space. The ARP temporarily provides 100% federally subsidized, premium-free COBRA to “Assistance Eligible Individuals” (AEIs) across a six-month window from 4/1/2021 – 9/30/2021.
Who is Eligible & Who Pays
- Coverage is available for qualifying individuals who have lost employer-sponsored health coverage due to involuntary termination or reduction of hours.
- Does not apply to voluntary termination.
- Not available to individuals eligible for coverage under any other group plan.
- The subsidy would not be available to individuals whose maximum period of COBRA coverage has expired.
- For qualifying coverage months between April 1, 2021, and September 30, 2021, assistance eligible individuals will be required to pay $0 for COBRA/Cal COBRA premiums. Plan sponsors are generally required to find the premium subsidy but will be able to recover the cost through a quarterly payroll tax credit. For Federal COBRA coverage, employer groups will be able to recover 100% of the subsidy, including the applicable 2% COBRA administrative fee, through a refundable payroll tax credit.
- Employers must send a notice with clear and understandable language including the availability of premium assistance and the option to enroll in different coverage if the employer permits it.
- The notice requirements can be met by adding verbiage to current letters or including a separate document.
- The notice must be sent within 60 days after the first of the month following the date of eligibility after 4/1/21.
- Failure to supply notice will be treated as a failure to meet the notice requirements under the applicable COBRA continuation provision.
- Model notices will be prepared by the DOL no later than 30 days following the enactment of the act.
- Employers must also send notice to advise members that the premium assistance is ending.
- The notice must clearly state the end date of assistance and advise that coverage may continue without premium assistance.
- Notice will not need to be sent to those individuals ended with the overall September 30, 2021, expiration date.
- Notice should be sent no earlier than 45 days before the expiration of assistance and no later than 15 days before the date of expiration of assistance.
- Model notices will be prepared by DOL (Department of Labor) no later than 45 days after the date of enactment.
- Expect additional guidance from the DOL and IRS.
Proposed Legislation in California
- Assembly Bill 4 ( Arambula )/Senate Bill 56 Durazo Medi Cal Eligibility:
Effective 1/1/22 would extend Medi Cal eligibility to anyone regardless of age and immigration status. This may lower the costs of unreimbursed medical treatment received in CA which now impacts private insurance premium rates.
- Assembly Bill 510 (Wood) Out of network health care benefits:
Allows providers to bill for out of network services if the insured has consented in advance to such. Aligns California with existing Federal Law.
- Assembly Bill 570 (Santiago) Parent Healthcare Act:
Would allow adult children to add dependent parents to their health insurance policies. Sponsored by insurance commissioner Ricardo Lara this legislation would effectively allow adults who are ineligible for Medicare/Med Cal to their family policy.
- Assembly Bill 1400 ( Kaira ) Guaranteed Health Care for All:
Abolishes all private health insurance and establishes a single-payer system in California. Does not answer many questions of cost, benefit, and accessibility.
- Senate Bill 255 ( Porantino ) Health Insurance: Employer Associations: Large Group Health Insurance:
Allows trust and association plans to continue to offer benefits to members in response to the limitations imposed under SB 1375 if the organization meets certain conditions and requirements.
- Senate Bill 568 (Pan) Deductibles: Chronic Disease Management:
Would prohibit a health plan from imposing a deductible for payment of claims for chronic conditions or preventive care services. May increase health insurance premiums.
Summary & Conclusion
Employers have until May 31, 2021, to send their required General Notice or Notice of Extended Election Period to Assistance Eligible Individuals (AEIs). Accordingly, they should work with their COBRA administrator to ensure all AEIs have been identified, that the administrator is prepared to timely provide all required notices, and that they have processes in place to identify AEIs who are approaching their maximum coverage period, so they can be notified when assistance is ending. Further, if the employer intends to allow AEIs to change their coverage, they should work with the administrator to notify individuals and instruct them how to change their plan, as well as the applicable deadline to request the change.