IRS Issues Additional Guidance on Premium Assistance for COBRA Benefits

The IRS has issued Notice 2021-46, which provides additional guidance affecting the application of the American Rescue Plan Act of 2021 on COBRA continuation coverage. The notice primarily focuses on state mini-COBRA provisions and the premium subsidy credit as follows.

State Mini-COBRA

• An individual is eligible for premium assistance if the original 18-month COBRA continuation coverage period has expired and the individual is eligible for an extension because of a second qualifying event, disability, or state mini-COBRA and the extended period falls between April 1, 2021, and September 30, 2021.
• State law that provides continuation coverage only for employees of a state or local government unit is considered comparable coverage and qualifies an assistance-eligible individual to premium assistance.

Premium Subsidy Credit

• The common law employer eligible for the premium subsidy is the common law employer of the assistance-eligible individual.
• If an employer is subject to COBRA and state mini-COBRA continuation coverage, the employer is eligible for the premium subsidy even if an assistance-eligible individual is required to pay the premiums directly to an insurer after COBRA ends. The insurer is not entitled to claim the COBRA premium assistance credit.
• If a group health plan, other than a multiemployer plan, is subject to COBRA continuation coverage, but covers employees of different common law employers that are members of a single controlled group, the common law employer of each assistance-eligible individual is entitled to claim the premium subsidy.
• An entity that provides health coverage to employees of another entity, but that is not the third-party payer of the employee’s wages is not entitled to the COBRA premium assistance credit.
• If an assistance-eligible individual would have been required to remit COBRA premium payments to a state agency that is obligated to make COBRA continuation coverage available to employees of state and local governments, the state agency—not the employer—is entitled to receive the premium assistance credit.
• An employer that offers health coverage through the small business health options program is entitled to claim the premium assistance credit if four conditions are met: 1) the employer must participate in the Small Business Health Options Program (SHOP) exchange; 2) the SHOP exchange provides the participating employer with a single premium invoice; 3) there is an agreement for the employer to pay all COBRA premiums to the SHOP exchange; and 4) the participating employer would have received the state mini-COBRA premiums directly from the assistance-eligible individuals were it not for the COBRA premium assistance.

Miscellaneous
If an assistance-eligible individual elected COBRA continuation coverage for dental or vision-only coverage and subsequently becomes eligible to enroll in other disqualifying group health plan coverage or Medicare that does not offer dental or vision coverage, the individual’s premium assistance ends even if the other coverage does not include all of the benefits.