The American Rescue Plan (ARP), signed into law on March 11, 2021, provides for a 100% subsidy of COBRA premiums for eligible employees beginning on April 1, 2021 and ending on September 30, 2021. Eligible employees electing COBRA coverage are not responsible for COBRA premiums during their eligibility. On April 7, 2021 the United States Department of Labor (“US DOL”) issued guidance regarding these subsidies.
Eligible Employees: Those employees or former employees who are eligible for and elect COBRA continuation coverage because of their own or a family member’s reduction in hours (including temporary leaves of absence or a change from full-time to part-time status) or an involuntary termination from employment. However, an employee is not eligible for premium assistance if they are eligible for another plan such as through a new employer’s or a spouse’s plan. Nor is such assistance available if the employee is terminated for gross misconduct.
Applying for the Subsidy: The COBRA subsidy requires healthcare plans or issuers of those plans to provide notice to eligible employees. This notice should contain any forms necessary for enrollment. An eligible employee has 60 days from the receipt of that notice to elect COBRA continuation coverage. In some cases, even those employees who did not elect COBRA coverage at the time they were eligible may get a second chance to do so under the ARP. However, the subsidy will only be applied to the period between April 1, 2021 and September 30, 2021. It is important to note that the total maximum period of COBRA coverage, typically 18 months from the qualifying event, is not extended under the ARP, although individuals who previously denied or dropped COBRA coverage may have a second chance to elect coverage back to April 1.
If an employee believes she or he is eligible, and does not receive such notice, they should contact their employer for more information. If an employee believes they are being wrongfully denied coverage they should contact their local association.
Premium Payments: An Assistance Eligible Individual must be treated, for purposes of COBRA, as having paid in full the amount of such premium from April 1, 2021 through September 30, 2021. Premiums should not be collected from such employees for that timeframe. Nor should administration fees.
Employers to whom COBRA premiums would otherwise be payable are entitled to a tax credit for the premium assistance.
More Information: Employees who work for state or local government employers and who have questions regarding the premium assistance can contact the Centers & Medicaid Services via email at firstname.lastname@example.org or call 410-786-1565.
The US DOL also issued the following model notices:
- Model General ARP and COBRA Notice (for those with qualifying events occurring between April 1 – September 30)
- Model Continuation Coverage Notice in Connection with Extended Election Periods (for those currently on COBRA and “second chance” qualifying beneficiaries)
- Model Alternative Notice to elect state law mini-COBRA coverage
- Summary of ARP COBRA Premium Assistance (must be included with all 3 above notices)