The American Rescue Plan Act of 2021 (“ARPA”) mandates that the federal government will pay 100% of COBRA premiums for qualified individuals, referred to as Assistance Eligible Individuals (“AEI”), between April 1 and September 30, 2021.
AEIs will not be required to pay their COBRA continuation coverage premiums, and the employer or plan to whom COBRA premiums are payable will be entitled to a tax credit for the amount of the premium assistance. This premium assistance is available for continuation coverage for all group health plans other than health Flexible Spending Arrangements under the Federal COBRA provisions, as well as for group insurance coverage under comparable state continuation coverage (or “mini-COBRA”) laws.
Who is Eligible?
AEIs are defined as individuals and their covered family members who lost benefits coverage due to a reduction in hours (including leaves of absence) or involuntary termination of employment other than for gross misconduct.
- AEIs who are covered by a plan through the Health Insurance Marketplace or Medicaid may switch to the COBRA continuation coverage and be eligible for premium assistance between April 1 and September 30, 2021, if they are within their COBRA-eligible period.
- AEIs who are currently covered by COBRA continuation coverage are also eligible for premium assistance for the duration of their eligible coverage period between April 1 and September 30, 2021.
- AEIs who were offered COBRA continuation coverage but declined or who elected COBRA continuation coverage and later discontinued it may elect COBRA continuation coverage and receive premium assistance if the COBRA continuation coverage period has not yet expired. ARPA does not extend the maximum period for COBRA continuation coverage (typically 18 months).
- For any AEI, the premium assistance will only continue through September 30, 2021 even if they continue to be eligible for COBRA continuation coverage after that date.
Who is NOT Eligible?
- Individuals who voluntarily left their employment or who were fired for gross misconduct are not eligible for the premium assistance.
- Individuals who were not previously enrolled in a health, dental, vision, or EAP plan are not eligible to sign up now.
- An AEI loses eligibility for premium assistance when he or she reaches the end of the maximum COBRA coverage period. (When COBRA premium assistance ends, the AEI may be eligible for Medicaid or a Special Enrollment Period to enroll in coverage through the Health Insurance Marketplace or to enroll in individual market health insurance coverage outside of the Marketplace.)
- An AEI also loses eligibility for premium assistance once he or she becomes eligible for other group health plan coverage, including coverage under a spouse’s plan, or for Medicare. Coverage by an excepted benefit such as dental or vision coverage, limited health benefits, specific disease or illness coverage, or supplemental health benefits does not impact eligibility.
NOTE: AEIs who are receiving the COBRA premium assistance must notify their plans if they become eligible for coverage under another group health plan. Failure to do so can result in an individual tax penalty.
Who is Responsible to Pay the Premiums?
Employers with more than 20 employees will be responsible to pay the COBRA premiums between April 1 and September 30, 2021 for AEIs who have elected coverage, then receive 100% reimbursement through payroll tax credits.
For employers with fewer than 20 employees who have fully-insured plans subject to a state’s continuation laws, the insurer will be responsible to pay the premiums and claim the credit.
Employers with fewer than 20 employees who have self-funded or level-funded plans subject to a state’s continuation laws serve in the role of insurer and are thus responsible to pay the premiums and claim the credit.
How Long Do AEIs Have to Elect Coverage?
COBRA-eligible individuals may elect COBRA coverage up to 60 days after receipt of the notice of the Special Election Period, even if they previously waived or discontinued COBRA. The election does not have to be retroactive to the beginning of COBRA eligibility to be eligible for premium assistance.
An AEI may be allowed by the employer to enroll in any plan offered, but the premium assistance cannot exceed the premium for previously-enrolled coverage. If the plan permits individuals to change coverage options, the plan must provide a notice of their opportunity to do so. Individuals have 90 days to elect to change their coverage after the notice is provided.
What Notices are Required?
Plans and issuers are required to notify all qualified beneficiaries who may qualify for premium assistance through a general notice. (See DOL Model General Notice.) This would include any employee or previous employee who lost coverage under group health plan on or after November 1, 2019 (which would encompass the 18-month COBRA continuation coverage period) due to reduction of hours including leaves of absence or involuntary termination of their employment other than gross misconduct. It would also include any employees who lose coverage between April 1 and September 30, 2021, due to reduction in hours or an involuntary termination of employment other than gross misconduct.
Plans covering smaller groups which are subject to state continuation programs are likewise required to provide notification to their eligible members. (See DOL Model Alternative Notice.)
In addition, a notice of the extended COBRA election period must be provided to any AEI who had a qualifying event before April 1, 2021. (See DOL Extended Election Period Model Notice.) This notice must be provided no later than May 31, 2021.
ARPA also requires that plans and issuers provide individuals with a notice of expiration of periods of premium assistance explaining that the premium assistance for the individual will expire soon. (See DOL Model Notice of Expiration of Premium Assistance.) This notice must be provided precisely between 15 – 45 days before the individual’s premium assistance expires.
Resources, answers to FAQs, and additional model notices issued by the Department of Labor can be found here: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy.
If you need assistance or guidance with any of the COBRA premium assistance requirements, please contact HR Service Inc. at (801) 685-8400. We’d be happy to help!
Prepared by Rhonda Hollier, SPHR & SHRM-SCP
and David Norton, SPHR & SHRM-SCP
Human Resources Business Partners