Note 6/8/2021: This information is for employers to provide information to former State of Wisconsin employees or local government employees who participated in the Wisconsin Public Employers Group Health Insurance Program.

Revised 5/11/2021 (Dates corrected: Any employee who had an involuntary termination of employment or hours reduction from November 1, 2019 through September 30, 2021, and any employees issued new notices of termination beginning April 1, 2021, may be eligible for subsidy.)

The American Rescue Plan Act of 2021 (ARP) was signed into law by President Biden on March 11, 2021. Part of this bill provides for temporary 100% COBRA premium subsidies for eligible former employees who suffered an involuntary job loss, and for current or former employees who have suffered a reduction in hours that made them COBRA-eligible. The bill provides an enrollment opportunity for individuals who would have been eligible for, but did not elect, COBRA at the time of their termination, as well as individuals who had COBRA but let it lapse before their full 18 months of eligibility was complete.

Subsidy is available for most benefits that allow COBRA continuation, including health and pharmacy benefits, uniform dental benefits, supplemental dental, and vision benefits.

This news item provides a summary of employer responsibilities related to ARP, as well as considerations specific to the programs provided by ETF.

Assistance Eligible Individuals (AEIs)

An AEI for the COBRA subsidy under ARP is a person who is eligible for COBRA continuation coverage due to an involuntary termination or reduction in hours and:

  1. Is enrolled in COBRA as of April 1, 2021, or
  2. Became eligible for COBRA between April 1 and September 30, 2021, or
  3. Would have still been eligible for COBRA on April 1, 2021, but either did not elect coverage or dropped coverage.

The typical COBRA period for involuntary termination is 18 months. Because of this, employers may have AEIs whose COBRA periods began as early as November 1, 2019.

The Internal Revenue Service (IRS) has provided some guidance for determining who is an AEI in a recent set of Frequently Asked Questions published on April 7, 2021. Employers may also find earlier guidance (IRS Notice 2009-27) issued in 2009 as a part of the implementation of COBRA subsidies under the American Recovery and Reinvestment Act (ARRA) helpful in defining involuntary termination.

Extended Election Period

ARP provides an extended election period for COBRA continuation coverage for any individual who experienced an involuntary termination of employment or reduction in hours and would still be eligible for COBRA continuation coverage between April 1, 2021 and September 30, 2021. If an AEI either did not take their COBRA election at the point their employment ended or elected and then ended COBRA coverage without becoming eligible for other insurance or Medicare, the AEI may be eligible to enroll for coverage effective April 1, 2021. 

In some cases, AEIs will be able to change to a different type of plan from the one in which they were initially enrolled when they became COBRA eligible. Please refer to the chart below for scenarios, whether the AEI would be able to change, and what changes are allowable.

Scenario Change Allowed? Details
Move from single to family plan No COBRA-qualified beneficiaries (QBs) must have been enrolled at time of initial COBRA eligibility.
Move from family to single plan Yes COBRA rules allow QBs to reduce their enrollment.
Move to a different health insurance carrier within the same plan design No ARP does not allow AEIs to choose plans with a higher premium; to reduce complexity and risk of higher premium plan selection, no changes will be allowed.
State Only: Move from the traditional plan (non-HDHP) to HDHP Yes, if the AEI did not have a FSA in the current plan year (see below) ARP allows employers to allow AEIs to elect lower premium plans; AEIs should be made aware that they will be required to open a HSA with ConnectYourCare (see below).
State Only: Move from the HDHP to the traditional plan No ARP does not allow AEIs to choose higher premium plans than they were enrolled in when they became COBRA-eligible.
State Only: Change supplemental dental plan options No ARP does not allow AEIs to choose plans with a higher premium; to reduce complexity and risk of higher premium plan selection, no changes will be allowed.
Move from the Access Plan to a non-Access Plan option Yes ARP allows AEIs to elect lower premium plans; AEIs should note that non-Access Plan options will not have the same nationwide network as the Access Plan. This is the only scenario where an AEI could change health insurance carriers, since WEA is the only Access Plan administrator.

Employer Notification Requirements

ARP requires employers to provide an initial notice to AEIs and their qualified beneficiaries of the temporary premium subsidy and method for qualifying. The notice must contain the following:

  • Forms necessary for establishing eligibility for premium assistance,
  • Contact information for employer administrators responsible for maintaining relevant information on premium assistance,
  • A description of the extended election period,
  • A description of the right to subsidized premium and any conditions on obtaining subsidized premium,
  • A description of the obligation of AEIs to notify employers if they become ineligible for the subsidy (e.g. access to another group health plan) and the amount of the penalty for failure to notify.

ETF has created a model notice for employers; see the Model COBRA Subsidy Notice (ET-2314a). ARP also requires employers to provide a second notice between 45 and 15 days of the end of the subsidy period to AEIs who are receiving the subsidy to notify them that the subsidy period is coming to an end. ETF has created a form for employers to send with notices for members to request treatment as an AEI (Request for Treatment as an Assistance Eligible Individual, ET-2314). 

For more information on “qualified beneficiaries” and “qualified events,” see Chapter 9 of the State Agency Health Insurance Standards, Guidelines and Administration Employer Manual (ET-1118) or Chapter 10 of the Local Employer Health Insurance Standards, Guidelines, and Administration Manual (ET-1144).

Premium Subsidy

An AEI is eligible for a temporary 100% premium subsidy under ARPA. Employers will be reimbursed for premiums through payroll taxes on the Employer’s Quarterly Federal Tax Return (IRS Form 941).

Subsidy is available for premiums for coverage beginning April 1, 2021. Subsidy will automatically terminate at the earliest of the following:

  • When the AEI’s COBRA eligibility ends;
  • When the AEI becomes eligible for another group health plan;
  • When the AEI becomes eligible for Medicare; or
  • September 30, 2021.

AEIs must notify the employer in writing if they become eligible for coverage under another group health plan or Medicare. AEIs who fail to make timely notification of eligibility for other insurance will pay a penalty of $250 for each failure. AEIs who are determined to have intentionally failed to notify an employer of eligibility for other coverage will be subject to the greater of a $250 fine or 110% of the premium assistance provided after termination of eligibility.

State Employers Only: HDHP and HSA

AEIs who were enrolled in the high-deductible health plan (HDHP) and health savings account (HSA) prior to their termination will also be eligible for premium subsidy. Employers will not be required to contribute to the HSA account. AEIs who re-enroll under the extended enrollment period should be notified that, should they choose the HDHP, they will be required to open and maintain a HSA through ConnectYourCare (CYC) as long as they are enrolled in the HDHP. Employers who process applications for AEIs that wish to move to the HDHP should submit an HSA enrollment form along with the AEI’s other application materials. Employees who enrolled in a Health Care Flexible Spending Account (FSA) during their active employment are ineligible to switch from a regular health plan to the HDHP during the same benefit year. However, if an AEI was laid off prior to 2021 and is re-enrolled during the extended enrollment period, the AEI may elect the HDHP and HSA. AEIs may not enroll in the traditional plan if they were originally enrolled in the HDHP.

State Employers Only: Sick Leave

At the time of permanent layoff, employees may elect to continue their health insurance coverage up to five years by using converted sick leave to pay premiums, followed by up to 36 months of COBRA coverage. Former employees are eligible for the ARPA subsidy only when COBRA coverage is in effect when both the qualifying event (i.e., involuntary termination of employment) and the effective date of the COBRA coverage occurs between November 1, 2019 and September 30, 2021. 

If an employee chooses to elect COBRA coverage at the time of layoff and forgo the use of sick leave, they are ineligible to use their sick leave later unless they reinstate employment with the State within 5 years or have 20 years of State service and are eligible to preserve their sick leave. Employees who opted to convert sick leave at the time of layoff would have the option of COBRA enrollment during the extended election period, but should be made aware of the potential loss of ability to convert any remaining sick leave beyond the subsidy period.

End of Subsidy

The COBRA subsidy ends on the earlier of the following dates:

  1. When the AEI’s COBRA period ends;
  2. When the AEI becomes eligible for other group health insurance coverage or Medicare; or
  3. September 30, 2021.

AEIs who become eligible for other group health insurance coverage or Medicare must notify their former employers prior to the first month of eligible coverage, regardless of whether they choose to enroll. Employees who fail to notify their employers of eligibility for other coverage may be subject to a fine as stated above.

Employer Responsibilities

  • Identify former covered employees and qualified beneficiaries who may be eligible.
    • Any employee who had an involuntary termination of employment or hours reduction from November 1, 2019 through September 30, 2021, and any employees issued new notices of termination beginning April 1, 2021, may be eligible for subsidy.
  • Issue General Notice by May 31, 2021.
    • Notice should be issued to covered employees and qualified beneficiaries, even if in some cases they are not eligible for subsidy. Notice to the employee constitutes notice to all qualified beneficiaries if the best available information indicates they live at the same address. Initial notices must be provided no later than May 31, 2021.
  • Acknowledge receipt of applications and determine eligibility for subsidy.
    • Former employees and their qualified beneficiaries that elect COBRA and request the subsidy must submit their completed forms, including the Continuation Conversion Notice (ET-2311) and the Request for Treatment as an Assistance Eligible Individual form (ET-2314) included in the notice, and application (if required) to the employer. The employer will complete and return the ET-2314 form to the applicant that acknowledges receipt of the application and confirms whether the applicant is eligible for subsidy.
    • If the employer determines the applicant is not eligible for the COBRA subsidy and denies the request, the applicant may contact the Centers for Medicare & Medicaid Services via email at phig@cms.hhs.gov or call 410-786-1565 for support.
  • Notify ETF of COBRA election.
  • Subsidize the premium, if eligible.
    • AEIs who enroll in COBRA will receive billing statements directly from their health plan. AEIs should submit the bill from the health plan directly to employers for payment. Employers will then submit payments for the full premium amounts directly to the health plan.
    • In order to facilitate payments between employers and health plans, ETF has created a list of contacts at health plans for employers to request IRS Form W-9s and employer identification numbers (EINs) to remit payments. Contact ETF for a copy of this listing.
    • Note: The initial bill may be for multiple months of premium, depending upon the timing of the billing cycle and due date which can vary between health plans. Employers should note due dates and promptly process payments to health plans; failure to pay in a timely fashion may result in cancellation of coverage. During the first two months, as this process is being established, AEIs may need to continue to pay premiums for existing COBRA coverage. Health plans will provide a bill credit to the AEI for any premium overpayments. 
  • Provide notice at end of subsidy period.
    • Between 45 and 15 days of the end of the subsidy period, for those AEIs whose coverage continues through or beyond September 30, 2021, employers must notify AEIs that the COBRA subsidy is coming to an end. Model notices for the end of the subsidy period are provided on DOL’s website, linked below.

Claiming Credit for Subsidy

Employers will claim credit for the premium subsidy as a reduction on their quarterly employer federal tax payments. ETF recommends that employers reach out to their tax counsel or accounting professionals for guidance on how to submit these reductions.

If you have any questions on this content, please reach out to your ETF case manager for assistance.

Reference Documents and Web Pages