DOL Releases More Details About ARPA Coverage

On March 11, 2021, President Biden signed the American Rescue Plan Act  (ARPA) which requires most employers to temporarily pay for health insurance continuation coverage (commonly referred to as COBRA) during the period between April 1 and the earlier of September 30, 2021, when the individual becomes eligible for Medicare or other group health insurance (through, for instance, a spouse or new employer) or when the individual’s 18 or 12-month continuation period expires).  This ARPA coverage applies to employees (and their qualified family members) whose hours were reduced, were laid off or were involuntarily terminated (for other than gross misconduct) anytime after October 2019, but who are still within the 18 month COBRA continuation period (or similar 12 month continuation period under Ohio’s mini-COBRA statute).    ARPA applies to for-profit, governmental, non-profit, large and small employers (who might not even be otherwise subject to COBRA), who will receive a credit against their Medicare payroll taxes for the amount of ARPA coverage provided in 2021.   On April 7, 2021, the DOL released FAQs and model notices for employers to provide to potentially eligible employees, including:  a Notice for Assistance Eligible Individuals (AEIs) who experience a qualifying event  between April 1 and September 30, 2021; a Notice for AEIs  who experienced a qualifying event prior to April 1, 2021 and are either currently enrolled, never enrolled or discontinued COBRA coverage; a Notice to be used by plans subject to Ohio's Mini-COBRA statute; a Notice of Expiration Period; and a summary of the ARPA premium assistance and Request for Treatment as an AEI form.  

Employers (and their COBRA administrators) should identify those former employees who are still within their 18 month COBRA (or, if applicable 12 month mini-COBRA) continuation period and send them the required notices before the end of May.  Even if the former employees never elected COBRA or dropped such coverage, they are entitled to elect within 60 days the new free (to them) ARPA coverage retroactive to April 1, 2021 if they have not become eligible for Medicare or another group medical plan.  Employees are not required to elect the new ARPA coverage (and may not want to do so if they already purchased an individual health plan which will not permit them to drop or to re-enroll once the ARPA coverage lapses, the individual plan has better benefits or deductible, they have already reached their deductible and do not want to start over with a new plan, or are concerned about losing tax subsidies, etc.).   Employees terminated after April 1 can receive the model notice with their regular COBRA notice (or it can be sent separately).

The DOL has provided a model “alternative” notice to former employees of small employers who are eligible for the ARPA coverage, but only under Ohio’s mini-COBRA statute.   This form requires a remarkable amount of editing by employers and/or their health plans.  Notably, ARPA does not change the election deadlines for Ohio’s mini-COBRA statute and it does not appear as though employees only covered under Ohio law may be entitled to ARPA coverage if they did not first timely elect and maintain continuation coverage under Ohio law.

Q6: Does the ARP change any State program requirements or time periods for election of continuation coverage?

No. The ARP does not change any requirement of a State continuation coverage program. The ARP only allows Assistance Eligible Individuals who elect continuation coverage under State insurance law to receive premium assistance from April 1, 2021 through September 30, 2021. It also allows Assistance Eligible Individuals to switch to other coverage offered to similarly situated active employees if the plan allows it, provided that the new coverage is no more expensive than the prior coverage. See Q15 and Q17 for more information.

Employers are also required to notify former employees between 15 and 45 days before their ARPA coverage is about to expire and the DOL has provided a Notice of Expiration of Period for such purpose.  

The statute and FAQs do not address a host of outstanding issues and ambiguities and the IRS has not yet issued any guidance about the available tax credits or refunds.  

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: No COBRA Notice Required Without Loss of Coverage Caused by Qualifying Event

On Friday, the Sixth Circuit Court of Appeals reversed an employee’s summary judgment finding that  COBRA had been violated because the employer failed to send a COBRA continuation notice when the employee began a medical/workers’ compensation leave of absence or when it stopped paying her premiums even though her medical insurance premiums began to be paid from her workers’ compensation payments upon the commencement of the leave.  Morehouse v. Steak N Shake, No. 18-4186 (6^th Cir. 2019). In reversing, the Court concluded that the change in payment method and continuation of her medical insurance rendered her reduction in hours (i.e., medical leave) irrelevant and that the later loss of coverage was caused by the employee’s failure to pay her insurance premiums when she was notified that the employer stopped paying them a few months later.  “[A]ltering the contribution method alone, as [the employer] did here when it began deducting premiums from [the employee’s] workers’ compensation checks, does not inherently change the ‘terms and conditions’ of coverage and therefore does not produce a ‘loss in coverage.’”  Accordingly, “no qualifying event occurred that would have triggered a mandatory COBRA notification” even though the employee ceased reporting to work because she did not “’cease to be covered under the same terms and conditions’ when [her] contribution method was altered” by deducting the premium from her workers compensation benefits instead of her paycheck.


According to the Court’s opinion, the employee injured her knee at work on May 25, submitted a workers compensation claim and requested a leave of absence.  The employer began paying workers compensation, began deducting her share of the insurance premiums from the workers compensation (instead of her paycheck) and also sent her an FMLA eligibility notice and request for medical certification, which was timely returned.  The employer failed, however, to ever designate her leave as covered by the FMLA.  Instead, the employer notified her on September 20 that she had exhausted her FMLA a month earlier, when it also stopped paying workers compensation and ceased paying her medical insurance.  She was notified on September 9 that if she failed to pay the entire premium, her medical insurance would be terminated.  She was also notified on September 20 that she should seek a reasonable accommodation and that if her employment was terminated, she could then seek COBRA continuation coverage.  When she failed to pay her insurance premium, her coverage was terminated on October 3, retroactive to August 14 for non-payment. She obtained replacement coverage in January.   Her employment was terminated on February 11 the following year.  


The employee challenged the termination of workers compensation in state court and filed a federal lawsuit for failure to send her notice of her rights of COBRA continuation.  There is no indication that she ever challenged the denial of FMLA leave due to the employer’s failure to ever properly designate FMLA leave. The trial court denied the employer’s motion for summary judgment and granted the employee’s motion, awarding her $2500 in dental bills, plus $50/day statutory damages (from when it stopped paying her premiums and when she obtained replacement coverage) and attorney’s fees.


On appeal, the Court noted that employers are required to send a COBRA notice upon a qualifying event, which includes termination of employment and reduction in working hours, if, but for the continuation coverage required under this part, the qualifying event would result in the loss of coverage.


COBRA provides that taking FMLA leave does not by itself constitute a qualifying event.  The parties argued whether the employee was properly placed on FMLA leave because that could impact whether there had been a qualifying event.  However, the Court decided that this argument was irrelevant because “the terms and conditions of [her] insurance have not changed and therefore there was no “loss of coverage” under the statute . . .”  Without loss of coverage, whether there has been an event is irrelevant.  In particular, the Court stated that “[a] ‘reduction in hours’ alone is not necessarily a qualifying event; it must also lead to a loss in insurance coverage.”  

Under 26 C.F.R. § 54.4980B-4, A-4(c), a loss of coverage “means to cease to be covered under the same terms and conditions as in effect immediately before the qualifying event.”  The regulation further clarifies that the “loss of coverage need not occur immediately after the [qualifying] event, so long as the loss of coverage occurs before the end of the maximum coverage period.”

Relying on an unreported 2007 opinion in Jordan v.  Tyson Foods¸ the Court found that it was the plaintiff’s failure to pay her health insurance premium in September which resulted in her loss of coverage, not her reduction in working hours following her injury or the change in payment method of the premiums.  In Jordan, that plaintiff had taken FMLA leave and then failed to pay his premium contribution as required by the employer’s policy and his coverage was terminated.  By the time he failed to return to work following his FMLA leave, his coverage had been terminated and he was not then provided with a COBRA notice.  The Court rejected that a qualifying event had occurred with his FMLA leave (because only the payment method had changed) or his termination (by which time his coverage had been terminated due to his non-payment of premium contributions).  Similarly, in this case, only the payment method changed upon the commencement of her leave of absence and her coverage was terminated on October 3 due to non-payment of premiums.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Employers Must Send Amended COBRA Notices

In December, President Obama signed the Department of Defense Appropriations Act for 2010 (the “DDAA”). In addition to prohibiting mandatory arbitration agreements which cover Title VII claims brought by employees of defense contractors, it also extended and expanded the COBRA premium subsidy established last year as part of the American Recovery and Reinvestment Act of 2009 (and reported last year here). The DDAA extends the duration of the COBRA subsidy had been scheduled to expire on December 31, 2009. Now, individual will be eligible for the COBRA subsidy if they are experienced a qualifying event (like termination) between September 1, 2008 and February 28, 2010 and the duration of the subsidy has been extended from 9 months to 15 months. Last month, the Department of Labor issued new model COBRA notices which employers are required to send out to newly eligible individuals, individuals who were receiving the subsidy and individuals whose eligibility period expired prior to December 19, 2009. Likewise, the Ohio Department of Insurance issued updated notices for small employers who are not covered by COBRA so that they are consistent with the new federal law. Employers should send out the notices within 60 days of when the individual became eligible for COBRA and no later than February 17, 2010.

There are three new notices (two federal and one state notice). The