We are writing to follow up on our prior communication regarding COBRA Premium Subsidies available under the American Rescue Plan Act of 2021 (the “Act”).
On April 7, 2021, the U.S. Department of Labor (“DOL”) issued initial regulatory guidance regarding the implementation of these subsidies, including model notices for eligible individuals. Employers administering COBRA internally or through another vendor should ensure these latest updates are implemented. Below is additional information for employers utilizing MedCost’s COBRA Administration Services.
MedCost’s COBRA Administration Services
MedCost is prepared to assist employers with the administration of these premium subsidies, including mailing required notices to individuals who may be eligible. We are also updating our COVID-19 Resource Page with further details, including the DOL’s frequently asked questions.
Because the subsidy is only available to plan participants who are eligible for COBRA due to a reduction of hours or involuntary termination, MedCost will need to know whether terminations were voluntary or involuntary. Unfortunately, existing electronic eligibility data feeds (i.e., 834 EDI) omit this information. Therefore, MedCost is standing up a new process to receive information regarding the nature of each termination. We will provide further details shortly.
In addition, the Act allows (but does not require) employers to offer individuals eligible for premium subsidies the opportunity to enroll in coverage that is different from the coverage they had at the time of the COBRA qualifying event. This option is subject to several caveats, additional notice requirements, and requires employers to offer an additional 30-day period to select new coverage options. For these reasons, MedCost is advising employers to follow the typical COBRA process that limits coverage to that which was in effect at the time of the COBRA qualifying event. Employers wishing to allow changes in coverage should contact the MedCost COBRA team (COBRA@medcost.com or 1-800-852-7040) as soon as possible to discuss further details, including feasibility and pricing.
Frequently Asked Questions
See the DOL’s FAQs for further information about the subsidies generally.
How will the premium subsidy be provided to individuals?
Eligible individuals will not have to pay the COBRA premium for the period of coverage from April 1, 2021, through September 30, 2021. Any payments that are received in error will be refunded. Eligible individuals who have enrolled in MedCost’s recurring electronic payment service will have those electronic premium payments suspended during this time period.
Are employers required to remit COBRA premiums to MedCost?
No. Employers will continue to self-fund claims expenses (and premiums for stand-alone plans) but are not required to make COBRA premium payments to MedCost.
How will employers be reimbursed for the COBRA premiums that are waived?Employers will claim a tax credit (on a dollar-for-dollar basis) on their quarterly payroll taxes for the COBRA premiums that are waived. We expect the IRS to issue further guidance on how such credits will work.
How do I determine if an employee was voluntarily or involuntarily terminated?
We are hoping the IRS will issue further guidance on this topic (as they did for the 2009 COBRA subsidy). Until further guidance is issued, some employers are looking to the 2009 IRS Notice for help in answering this question. At a high level, that notice defined involuntary as “the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services. … The determination of whether a termination is involuntary is based on all the facts and circumstances. For example, if a termination is designated as voluntary or as a resignation, but the facts and circumstances indicate that, absent such voluntary termination, the employer would have terminated the employee’s services, and that the employee had knowledge that the employee would be terminated, the termination is involuntary.”
What specific benefits are eligible for the premium subsidy?
The COBRA subsidy is available for each health benefit which is subject to COBRA other than a health flexible spending account. This includes major medical, dental and vision plans.
Who should I contact with additional questions?
MedCost’s COBRA team (COBRA@medcost.com or 1-800-852-7040) and your Account Manager are available to assist with any additional questions.