AHIP Seeks COBRA Subsidy Guidance

March 24, 2021

Carol Weiser
Benefits Tax Counsel
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220

Rachel Leiser Levy
Associate Chief Counsel (EEE)
Internal Revenue Service Office of Chief Counsel
1111 Constitution Avenue NW
Washington, D.C. 20224

Ali Khawar
Principal Deputy Assistant Secretary — Employee Benefits Security Administration
U.S. Department of Labor
200 Constitution Ave NW
Washington, D.C. 20210

Amber Rivers
Acting Director — Office of Health Plan Standards and Compliance Assistance
U.S. Department of Labor
200 Constitution Ave NW
Washington, D.C 20210

Jeffrey Wu
Acting Principal Deputy Administrator & Deputy Director for Policy
Center for Consumer Information and Insurance Oversight
Centers for Medicare and Medicaid Services
Department of Health and Human Services
200 Independence Avenue SW
Washington, D.C. 20201

Re: Request for COBRA Subsidy Guidance and Clarification on EBSA Disaster Relief Notice 2021-01

Dear Ms. Weiser, Ms. Levy, Mr. Khawar, Ms. Rivers and Mr. Wu,

I write on behalf of America's Health Insurance Plans (AHIP) to request guidance from the Departments of the Treasury, Labor, and Health and Human Services (“the Departments”) on implementing section 9501 of the American Rescue Plan Act (ARPA) that also further clarifies EBSA Disaster Relief Notice 2021-01.¹ We genuinely appreciate the responsiveness of the Departments to the rapidly changing circumstances impacting employee benefit plans over the past year during the Coronavirus Pandemic. AHIP and our members have been proactively engaged from the earliest days of the pandemic in finding ways to ease burdens on consumers, keep Americans enrolled in their health coverage, and adapt care delivery when necessary. Among our central goals has been to keep Americans enrolled in employer-provided coverage when that was available to them.

The enactment of ARPA provides significant assistance to Americans as we continue to combat the virus and build back our economy. In particular, section 9501, which establishes tax credits to fund 100% of the cost of COBRA continuation coverage for those who had employer-provided coverage, is an unprecedented level of support for maintaining the employer-provided coverage system. We are committed to effectively communicating the health care changes created by ARPA, including the COBRA subsidies. A complicating element our member health insurance providers have raised is how the COBRA subsidies will interact with EBSA Disaster Relief Notice 2021-01, the recent “Outbreak Period Notice” that addresses the extension of timeframes for certain plan actions during the Outbreak Period.

To effectively achieve our shared goals of keeping Americans enrolled in affordable health coverage and implementing ARPA, we are writing to request guidance from the Departments on both the COBRA subsidies and further clarification of how the Outbreak Period Notice will affect deadlines under a health plan. A list of specific guidance items or clarifications from previous guidance is included below, and then discussed in greater detail in two parts: first, a focus on the ARPA section 9501 COBRA subsidies and then discussion of the Outbreak Period Notice.

Implementing guidance is requested that addresses, with illustrating examples, each of the following:

• Examples that illustrate the interaction and application of the Outbreak Period Notice to the timeframes established in section 9501;

• The definition of “involuntary” termination of employment under section 9501, including how “gross misconduct” is to be interpreted;

• Processes for determining which individuals are assistance-eligible under section 9501;

• The time period for plans to provide the required COBRA subsidy notices to participants and any grace periods applicable;

• The treatment of the administrative fee for COBRA;

• Under which circumstances a tax credit is to be paid to or claimed by an employer versus an insurer or plan administrator, as well as the process for advancing the COBRA subsidy tax credit to employers and insurers;

• When and how refunds for COBRA premiums already paid for months between April 1, 2021 and September 30, 2021 should be applied;

• Whether any prior guidance implementing similar provisions subsidizing COBRA under the American Recovery and Reinvestment Act of 2009, such as IRS Notice 2009-27, may be relied upon by taxpayers for the current subsidies;

• The application of the COBRA subsidy provisions to state continuation coverage;

• Whether COBRA enrollees must be retroactively enrolled in coverage dating back to the date of termination and whether premium will be due;

• Whether beneficiaries are restricted to one plan choice, or they may change plan selections while eligible for COBRA and still claim the tax credit;

• Whether the expiration of COBRA continuation coverage after September 30, 2021 will be treated as a qualifying event for a Special Election Period on the Marketplace; and

• A number of issues that need clarification under the Outbreak Period Notice, including the application of the one-year tolling period to certain “stacked” deadlines (e.g., COBRA election/premium payments; claims/appeals), commencement of timeframes once the outbreak period ends, and the application of the guidance to health FSAs.

ARPA Section 9501 — COBRA Subsidies

As a threshold matter, our members have questions about how the 100% COBRA subsidies will work in practice. Namely: what entity will be required to claim the credits, in what form, and at what time? Guidance answering those questions that is accessible to employers of all sizes will be fundamentally important and making sure assistance eligible individuals have access to the coverage to which they are entitled. Under section 9501, the COBRA subsidy tax credits are advanceable to the employer or insurer, as applicable, “according to forms and instructions provided by the Secretary.” The ability to receive an advance tax credit for COBRA premiums may be crucial for many employers, particularly smaller firms, and we encourage IRS to work as quickly as possible to provide the forms and instructions that will be needed to implement this provision. Enrollments and notices will likely begin before any guidance is issued, raising the question of what COBRA administrators are to do to comply beginning April 1^st if no guidance is available. Health plans, employers, and consumers would benefit from a grace period for compliance for those administrators who are engaged in good faith efforts to comply but will need to review any guidance for information such as model notice language.

The statute also limits subsidies to former employees (“assistance eligible individuals”) who were “involuntarily terminated” but does not define involuntarily for these purposes. As this standard was used previously, in 2009 following enactment of ARRA, we urge the Departments to adopt the standard used in 2009 guidance. Questions 1-9 in IRS Notice 2009-27 provide answers as to how involuntary termination will be determined, and similar guidance should be quickly issued in 2021 to address this uncertainty. Whatever definition of “involuntary” is used, health plans and their employer clients will be required to make a quick determination affecting coverage eligibility during an ongoing pandemic. To avoid unnecessary disruption in health coverage, we request that the Departments adopt a similar “facts and circumstances” standard as in the 2009 guidance, along with a focus on compliance assistance, rather than strict enforcement, as long as employers, insurers, and health plans are acting in good faith to comply with the requirements.

The question of who will be eligible for a COBRA subsidy would benefit from guidance. This would include whether an individual with eligible dependents would be able to claim a subsidy only for their dependent children to enroll in a group health plan through COBRA. The notices that an employer or health insurance issuer must provide are another area, as it is unclear whether each individual that has been involuntarily terminated or experienced a reduction in hours must receive a notice or whether a generic notice may be provided to all pending and enrolled COBRA beneficiaries.

The section 9501 tax credits are available for premiums paid towards comparable state continuation coverage (“State COBRA”), but guidance is required to know how to guarantee credits are applied to such. This includes clarity on which entity, the employer or health insurance provider, would claim the premium tax credit when the member is on State COBRA and being directly billed.

COBRA continuation coverage also includes a 2% administrative fee. Clarification is requested on whether that fee may continued to be charged and the impact of any tax credit applicability on the calculation of the fee.

Outbreak Period Notice

We appreciate DOL issuing Disaster Relief Notice 2020-01, particularly after engaging with us on the need for further guidance as our members were uncertain how long the extension of timeframes would extend. However, numerous unanswered questions remain as to how the Outbreak Period Notice is to be applied. These exist separate from the questions about interaction with the COBRA subsidies but has been exacerbated given millions of people may soon enroll in COBRA using federal tax subsidies. Therefore, to avoid further confusion and help health plans and employers continue coverage for as many people as possible, we ask that the following issues also be clarified as soon as possible.

While we understand that the extension of timeframes in the Outbreak Period Notice applies on a per individual basis, many are unsure how separate deadlines that may be extended shall be treated with respect to the same individual. These separate, but related, deadlines for permitted or required actions are often called “stacked deadlines.” For example, members have inquired as to a situation where a deadline to file a claim is tolled for one year, but the claim is then denied. Does this begin a new deadline for an appeal, now extended for another full year? Similarly, in instances where the COBRA election deadline occurred during the Outbreak Period, but tolled one year, once the qualified beneficiary makes the election, does the Outbreak Period Notice extend the deadline for premium payment for one year? These interacting and overlapping deadline scenarios have generated significant confusion that could impact beneficiaries.

To address this confusion, we request that the Departments issue clear guidance, with illustrative examples, that related deadlines for an individual are only tolled one year from the first deadline due date, rather than each deadline being subject to its own new one-year tolling period. To apply a one-year tolling period to each individual deadline would extend these periods out multiple years based on each claim for benefits or each COBRA election and subsequent payment(s) and be detrimental to taxpayers, with no clear relationship to offering relief during the national emergency.

Health insurance providers would also benefit from guidance that expressly interprets the interaction between the Outbreak Period Notice and Section 9501. For example, if the Outbreak Period extension guidance applies to the special election for the COBRA subsidy period and an individual fails to elect coverage until the end of the outbreak period, what entity bears responsibility for payment for the coverage retroactive to April 1, 2021? Clarity on whether the extension of timeframes itself applies to a special election for COBRA, given the new tax credit, is essential. The creation of new subsidies after the Outbreak Period Notice was issued leads to the assumption that an individual must still elect continuation coverage within 60 days of April 1^st, without a disregard of that deadline, but clarity is necessary to confirm. Health plans would benefit from numerous illustrative examples on the applicability of COBRA subsidies for individuals who became eligible for COBRA continuation coverage in 2020, but did not elect until after subsidies take effect in April 2021, particularly with respect to the role that 30-day grace periods play and whether those who have not paid prior premiums during the Outbreak Period may be eligible to enroll in coverage once subsidies become available.

Recognizing you have many urgent matters commanding your attention, we greatly appreciate your attention to these requests. Clarity around implementation of COBRA subsidies will be essential to ensuring millions of Americans do not lose health coverage throughout the next several months. Our hope is that the Departments can issue clarifying guidance with clear examples as soon as possible.

If you have any questions or would like to discuss, please do not hesitate to contact us.

Sincerely,

Jeanette Thornton
Senior Vice President
Product, Employer, & Commercial Policy
AHIP (America's Health Insurance Plans)
Washington, DC