1. Introduction

COBRA generally applies to all private-sector group health plans maintained by employers that had at least 20 employees on more than 50% of their typical business days in the previous calendar year. The American Rescue Plan Act of 2021 (ARPA) generally requires employers subject to COBRA or a state’s mini COBRA law, i.e., employers with between 2 and 20 employees, to subsidize 100% of the COBRA premiums for employees who lost their employer-sponsored health coverage either because of an involuntary termination or a reduction of hours. Absent the earlier exhaustion of COBRA continuation coverage or an assistance eligible individual (“participant”) becoming eligible for health coverage elsewhere, the end date of the COBRA subsidy will expire on September 30 unless Congress passes legislation extending the deadline.

  1. Requirement to Advise Recipients of COBRA Premium Subsidy of Expiration: 15–45 Days

Among other things, ARPA imposed numerous notice requirements that employers, or their COBRA vendors, needed to comply with during the spring/summer of 2021 to both identify and notify a population of former and current employees of their possible eligibility for a COBRA premium subsidy. In addition to this form of prospective notice, ARPA also requires that plans and issuers provide COBRA subsidy eligible participants with a notice of expiration of periods of premium assistance. To that end, the plan sponsor or issuer must communicate to the COBRA participant receiving the subsidy that the COBRA premium assistance will expire, with the date of the expiration, and that the participant may be eligible for coverage without any premium assistance, either through COBRA continuation coverage, coverage under a separate group health plan or through Medicaid or the Health Insurance Marketplace. The expiration notice must be provided 15–45 days before the individual’s premium assistance expires.

A copy of a DOL-approved instruction page (which does not have to be provided to the participant) and the model Premium Expiration Notice can be found here:

Model Notice of Expiration of Period of Premium Assistance

Suggested Action Steps:

  1. Coordinate with your COBRA vendor to confirm that expiration notices will be sent timely before September 30.
  2. If your business manages COBRA itself, calendar that the final batch of expiration notices should go out no earlier than August 15 and no later than September 15.
  1. Is There a Penalty for Failure to Timely Notify of Expiration of COBRA Subsidy?

ARPA does not have an express statutory penalty for failure to provide the Premium Expiration Notice, but the statute does reference a plan sponsor’s notice requirements under ERISA. A health plan subject to ERISA may possibly trigger penalties under ERISA for failure to satisfy notice requirements ($110 a day) and/or fiduciary duty liability exposure if it does not timely terminate the ARPA/COBRA subsidy and claims continue to be paid by the health plan or harm is somehow caused to an individual because of a lack of timely Notice of Expiration.       

Note: This alert constitutes compliance advice from the Fred C. Church Agency as your employee benefits broker and does not establish an attorney-client relationship with the recipient, who is free to consult with legal or tax counsel of their own choosing.