On March 11, 2021, the American Rescue Plan was signed into law. One aspect of the American Rescue Plan provides up to six months of 100% COBRA premium assistance to qualified individuals. April 14, 2021
The recently passed American Rescue Plan (“ARP”) includes, among other programs intended to stimulate the economy, COBRA premium assistance between April 1, 2021 and September 30, 2021 for eligible individuals.
What is the COBRA Premium Subsidy?
Employers are required to provide eligible employees and their dependents fully subsidized COBRA coverage at 100% of the COBRA cost from April 1, 2021 through September 30, 2021. Employers will receive a tax credit for provision of subsidized coverage.
Who is Eligible for the COBRA Premium Subsidy?
Individuals who lost health insurance coverage as a result of an involuntary termination or reduction in hours are eligible for the COBRA premium subsidy if they became eligible for COBRA coverage on a date where their eligibility period would include all or a portion of April 1, 2021 through September 30, 2021. This means that individuals who lost coverage as far back as November 2019, depending upon the circumstances, could be eligible for premium subsidies. Individuals who left employment voluntarily are not eligible for the subsidy.
Extended Ability to Elect COBRA Coverage for Certain Former Employees
Individuals already enrolled in COBRA benefits for a reason qualifying them for the subsidy should automatically receive the subsidy from April 1, 2021 through September 30, 2021. Individuals who previously declined or terminated COBRA coverage and whose COBRA coverage period spans a portion of April 1, 2021 through September 30, 2021 will be granted a new 60-day window to elect COBRA coverage. The new 60-day window runs from when the individual receives notice of their eligibility for the COBRA premium subsidy from their employer/former employer. Notices must be sent to these individuals by May 31, 2021. Importantly, the ARP does not restart the time period for which an employee can participate in COBRA coverage. The maximum period of coverage remains governed by the date of the COBRA qualifying event.
Notice of Eligibility for Subsidy
The ARP requires employers to provide individuals currently enrolled in COBRA coverage, who previously declined or terminated COBRA coverage and who become eligible for COBRA benefits between April 1, 2021 and September 30, 2021 with information regarding the subsidy. Employers can either revise existing notices or provide a supplement to the notice that includes the following information:
Termination of Eligibility for Subsidy and Notice of Termination
Individuals who become eligible for other group health insurance or Medicare or are no longer eligible for COBRA coverage are not eligible for the premium subsidy.
Employers must provide notice of the termination of the subsidy between 15 and 45 days before the premium subsidy will terminate, unless eligibility for the subsidy ends because an individual became eligible for other group health insurance or Medicare.
The Department of Labor recently issued model notices for use in connection with the COBRA subsidies shortly. The model notices can be found here.
Funding the Premium Subsidies
Similar to the paid leave benefits provided under the Families First Coronavirus Relief Act, employers will receive a tax credit against their quarterly employment taxes in an amount equal to the COBRA premiums paid by the employer pursuant to the ARP.
Employers should consult with their COBRA administrators to ensure that they are prepared to comply with the ARP’s COBRA provisions and issue all of the required notices.
Please contact an attorney in MSF’s Employment Group if you need assistance with respect to this information.
Andrea B. Neuman
Partner | Chair, Employment
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Associate | Employment
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