It was recently announced that there would be a new 100-percent COBRA premium subsidy under the American Rescue Plan Act (ARPA). This coverage — which extends from April 1, 2021, through September 30, 2021 — has been the source of a lot of confusion.
If you’re an employer, here are some things you need to know about the COBRA subsidy.
Who is Covered By the COBRA Premium Subsidy?
The temporary 100 percent COBRA premium subsidies cover eligible current and former employees. These Assistance Eligible Individuals (AEIs) are COBRA-qualified beneficiaries who may be eligible because they experienced:
- An involuntary job loss
- A reduction in hours that made them eligible for COBRA
This includes both the employee and their dependents. These AEIs should also meet one or more of the following requirements:
- Be enrolled in COBRA as of April 1, 2021, or
- Became eligible for COBRA between April 1 and September 30, 2021, or
- Would have been eligible for COBRA on April 1, 2021, but did not choose to be covered or dropped coverage altogether.
Some examples of group health plans (GHPs) that are not covered under this subsidy include:
- Healthcare FSAs and HSAs
- Church plans that aren’t subject to ERISA
- Retiree-only plans
Nearly all qualified beneficiaries aged 65+ will not be eligible for the COBRA subsidy since they are eligible for Medicare, but more on that later.
A Note On Involuntary Termination
One of the biggest questions since the COBRA subsidy was announced was what exactly is involuntary termination? For instance, if a teacher is employed under a one-year contract and that contract has finished, is it a voluntary or involuntary termination?
While we wish there was a black and white answer, this is entirely situational (for instance, was the employee given the opportunity to renew their contract and they turned it down?).
We recommend staying in close contact with your legal counsel to ensure you’re making the right decisions for your past and current employees.
What is the Amount and Duration of the COBRA Subsidy?
Coverage for the COBRA subsidy is at 100 percent, is free and is not taxable to the AEI. The period is a maximum of six months, from April 1, 2021, through September 30, 2021.
The COBRA subsidy will end for the qualified beneficiary if any of the following situations occur:
- The individual is eligible for Medicare (first day of the month on or after)
- The individual is eligible for other GHP coverage (first day of the month on or after)
There are penalties if an AEI fails to notify the appropriate parties about their eligibility for Medicare or other GHP coverage.
How Do Individuals Validate Their COBRA Subsidy Status?
Employers are required to provide a notice to AEIs and their qualified beneficiaries of the COBRA premium subsidy and the ways in which they may qualify. Remember that the only qualifying event for being an AEI is to have either been involuntarily terminated or had a reduction of hours.
If this is the case, your COBRA vendor will send eligible employees a second-chance election where they confirm they are eligible. At that point, employees will fill out a form and elect their free coverage.
If an employee or former employee is an AEI who prepaid for coverage during the six-month COBRA subsidy period, they will be refunded for those premiums.
If you’re looking for more information, check out the Department of Labor’s COBRA Premium Assistance FAQ page.
Prescription drugs can be exceptionally costly, and prices continue to be on the rise. According to Bloomberg, Americans spend an average of $1,200 per person per year on prescription drugs — more than anyone else in the world.
But there are ways you can help employees drive these costs down. One of those ways is leveraging a pharmacy benefit manager to control your healthcare spending and make your employee benefits more affordable.
What is a Pharmacy Benefit Manager?
Pharmacy benefit managers (or PBMs) are companies that can help manage your prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers and more.
By mediating between insurers and other members of the healthcare industry, PBMs can help negotiate customer contracts to get the best rates, ultimately helping employees prioritize their wellness without unnecessary costs.
How Can a Pharmacy Benefit Manager Help My Business?
At Cornerstone, our clients that are self-funded or have an interest in creating a solution to reduce their prescription drug spend may benefit greatly from working with pharmacy benefit managers.
PBMs are “behind-the-scenes” negotiators to control drug spending and lower medication costs for your employees. Our clients often see 30 to 35% — often as high as 50% — of their claims costs coming from prescription drugs. An effective PBM and management program can be implemented to save your employees hundreds of thousands of dollars.
How Does Cornerstone Work With Pharmacy Benefit Managers?
As an employee benefits company, Cornerstone works with several PBMs directly to ensure the correct fit for our self-funded clients. We will personally “shop” for the right pharmacy benefit manager for your needs.
You may have lots of questions regarding prescription drug coverage, such as:
- How are these prescriptions covered?
- How are rebates from the manufacturer handled?
- How do you determine which drugs are eligible for the rebates?
- What type of clinical management programs are used in conjunction with the prescription drug list to ensure the best fit and correct dosage?
By working with insurance consultants like Cornerstone, we can help you have these conversations — and more — with your PBM. We have access to the tools, knowledge, expertise and relationships to ensure our self-funded clients have the right PBM to keep them as competitive as possible while offering high-quality benefits to their employees.
Cornerstone’s benefits administration specialists also have the technology that can analyze your business’s healthcare claims to know exactly how your benefits are being used so you can rest assured we’re making the best-educated decision for our clients’ programs.
Data analytics continues to be an extremely effective tool for managing claims within a self-funded client and having an efficient PBM can continue to drive your costs down.
Healthcare and employee benefits administration can be complex. Let Cornerstone’s experts help your company find the best rates so your employees can stay happy and healthy. Get in touch today.
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