On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the “Act”) into law. The Act mandates that employers provide 100% of an eligible employee’s cost of continuing group health coverage under Consolidated Omnibus Budget Reconciliation Act (“COBRA”) for the period of April 1, 2021 through September 30, 2021. Employers that pay such COBRA continuation coverage will receive tax credits from the federal government. On April 7, 2021, the U.S. Department of Labor (“DOL”) published guidance and model notices for the COBRA continuation coverage (available at Department of Labor Laws and Regulations COBRA).
What employers are required to offer COBRA premium assistance?
All private-sector employers or employee organizations subject to (i) COBRA rules under the Employment Retirement Income Security Act (“ERISA”) or (ii) state and local laws mandating continuation of health insurance.
According to the DOL guidance, COBRA generally applies to all private-sector group health plans that had at least 20 employees on more than 50% of its typical business days in the previous calendar year. Part-time employees count as a fraction of a full-time employee based on the number of hours worked divided by the hours an employee must work to be considered full time. DOL’s FAQ issued in December 2018 about COBRA available at Department of Labor Resource Center .
Who is eligible?
Under the Act, employees that were covered by a group health plan and have been terminated or had their hours reduced are eligible to receive the subsidy, if they elect such coverage (“Assistance Eligible Individual”). Additionally, such employee’s spouse and dependent children also qualify for coverage. Employees who voluntarily terminate employment or reduce hours are not eligible for COBRA continuation coverage. Additionally, individuals who are covered by Medicare or another group health plan, such as a plan offered by a new employer or a spouse’s employer, are not eligible. If an individual receiving COBRA continuation coverage becomes eligible for coverage under another plan, then the individual must notify the plan under which COBRA continuation coverage is being provided.
The Act allows those individuals whose COBRA election period expired before April 1, 2021, to elect for the subsidized COBRA coverage so long as they are still within the required period under the applicable COBRA provisions (typically 18 months). Therefore, if an eligible individual did not elect to receive coverage or his or her COBRA continuation coverage lapsed, then such individual is eligible to elect COBRA continuation coverage under the Act. However, the Act does not extend the COBRA continuation coverage period beyond the maximum required period.
What notices are required under the Act?
The Act requires that group health plans and issuers send the following notices:
(i) a general notice to all qualified beneficiaries who have a qualifying event (i.e. a reduction in hours or involuntary employment termination from April 1, 2021 to September 30, 2021);
(ii) a notice of the extended COBRA election period to any Assistance Eligible Individual (or any individual who would be an Assistance eligible Individual if a COBRA continuation coverage were in effect) who had a qualifying event before April 1, 2021, as long as their maximum COBRA continuation coverage period would not have ended before April 1, 2021; and
(iii) a notice of expiration of periods of premium assistance between 15 – 45 days prior to the individual’s premium assistance period expiration date.
The notice of extended COBRA election must be provided by May 31, 2021. Visit Department of Labor Laws and Regulations Extended COBRA Elections for model notices provided by the DOL.