Employers have little time to waste in identifying and notifying laid-off employees who qualify for free health-care coverage under the American Rescue Plan signed into law last month by President Joe Biden.
The law provides fully subsidized coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) from April 1 through Sept. 30 for employees who were involuntarily laid off or lost their job-based health plans due to reduced hours during the Covid-19 pandemic.
The $22.8 billion benefit, pushed by employer groups, enables people to keep the expensive coverage temporarily so that they don’t have to change plans or become uninsured. The Kaiser Family Foundation estimated that 2 million to 3 million people may have lost employer-based coverage between March and September of 2020, but the uninsured rate may not have changed much as the lost employer-based coverage may have been offset by Medicaid and Affordable Care Act enrollment.
Under the American Rescue Plan Act, people are eligible for the subsidies only if they don’t have access to other group coverage, such as through a spouse.
Employers must provide notices about the COBRA subsidies by May 31 for people who were first eligible to elect the coverage as far back as October 2019—even if the individuals didn’t choose it at the time or later dropped it.
The Department of Labor has issued guidance that includes model notices that can be used by employers.
But the Internal Revenue Service also needs to issue guidance to help employers identify who is eligible for the subsidies, Kaye Pestaina, senior principal of Mercer’s law and policy group, said in an interview.
“We have folks that might say that, ‘Oh well, I left my job because of job care reasons, and that was involuntary for me,’” Pestaina said. The Treasury Department may disagree, she said.
A Complicated Procedure
Administering the subsidies is complicated, Pestaina said, in part because guidance issued during the pandemic allowed people to delay electing COBRA.
One of the difficulties employers will face will be identifying people who are eligible for the subsidy but didn’t elect COBRA the coverage initially, or later dropped it, she said. Pestaina is co-author of a blog post that provides eligibility examples.
Another challenge for employers will be communicating the details of the subsidy to their laid-off workers, Damian Myers, a partner with Nixon Peabody LLP, said in an interview.
“There’s a lot of moving parts going on here, and there’s a lot of situations, fact patterns, that come up. A lot of employees aren’t going to know if they’re eligible or not,” said Myers, who co-authored an alert on what employers need to know about the COBRA subsidy.
In addition, employers will have to get the money back from the government that they spend providing the free coverage to former employees, Myers said.
Employers can get that money either through tax credits that reduce their Medicare taxes, or they can request advance credits based on their estimates of what they will spend, he said.
Special Enrollment Period
The Department of Health and Human Services is likely to allow people whose COBRA subsidies expire at the end of September to sign up more easily for Affordable Care Act coverage.
“CMS is actively considering this issue, and recognizes the importance of helping individuals with COBRA subsidies gain access to coverage after the subsidies end,” a spokesperson for the Centers for Medicare & Medicaid Services said in an email.
Congressional Democratic health leaders called for the HHS to establish a special enrollment period that would allow people to get ACA coverage after the subsidies expire. The American Rescue Plan Act also includes increased subsidies for people in ACA plans.
A special enrollment period would allow individuals to sign up for coverage without jumping through as many hoops.
A spokesperson for the House Education and Labor Committee said the special enrollment period is likely to be announced as part of the 2022 Notice of Benefit and Payment Parameters final rule that is pending at the Office of Management and Budget.
The Trump administration finalized parts of the rule, which governs the ACA exchanges, shortly before President Donald Trump left office in January. The final payment notice will address other things that weren’t in the January rule, such as special enrollment periods, according to Katie Keith, associate research professor at Georgetown University.