COBRA Provisions in the American Rescue Plan Act of 2021 (ARPA)
In addition to providing stimulus checks to many Americans, ARPA includes provisions designed to make it easier for people who have lost their jobs to receive health care continuation coverage under COBRA.
THE SCOPE OF THE SUBSIDY
A COBRA qualified beneficiary who is an Assistance Eligible Individuals (AEI) can receive COBRA continuation coverage without having to pay for it during the period beginning on April 1, 2021 and ending on September 30, 2021 (or earlier if the individual ceases to be an AEI or the maximum period of COBRA coverage for the individual ends before September 30.)
Note that COBRA continuation coverage includes coverage provided under State laws that mandate coverage similar to COBRA. This will affect small fully insured employers (fewer than 20 employees).
An AEI is an individual who is eligible for COBRA due to an employee’s termination of employment or reduction in hours and has elected COBRA. However, an employee who voluntarily terminates employment cannot be an AEI.
Eligible Individuals are those who:
(1) have not elected COBRA, but could be AEIs if they had made an election (they will have an opportunity to elect within 60 days after they receive notice of the new election period); or
(2) had previously elected COBRA but discontinued coverage prior to April 1, 2021.
COBRA coverage for individuals who make an election during the extended election period will commence on April 1, 2021.
An employer may (but is not required to) offer AEIs the option to enroll in a different level of coverage provided that:
- the premium for the alternative coverage does not exceed the premium for the coverage in which the individual was enrolled at the time of the qualifying event;
- the alternative coverage is
- offered to all similarly situated active employees; and
- not coverage that provides only for excepted benefits, a flexible spending arrangement, or a qualified small employer HRA.
Premium assistance for COBRA coverage for an AEI ends on the earliest of the following dates:
- September 30, 2021;
- The date coverage would ordinarily end (generally no longer than 18 months after the date of the qualifying event); or
- The date the AEI becomes eligible for coverage under any other group health plan (other than coverage that provides only for excepted benefits, a flexible spending arrangement, a qualified small employer HRA, or Medicare).
THERE WILL BE NOTICES
COBRA coverage rule changes require notice. Accordingly, ARPA requires notice of the availability of premium assistance available under ARPA, and alternative election options should an employer chose to offer them.
The notice must be given by May 30, 2021. The statute contains details regarding the contents of the notice. We omit those here as the law requires the Secretary of Labor to provide model notices by the end of April and we expect most employers will use them.
Additionally, AEIs must be given notice of the expiration of the premium assistance period (unless the expiration is due to the AEI’s eligibility for other coverage). This notice must be given during the period that begins 45 days before the expiration of assistance and ends 15 days before the expiration of assistance. Here too the Secretary of Labor is tasked with issuing model notices.
If premium assistance ends due to eligibility for other coverage, the AEI must notify the group health plan; details of this obligation are to be specified by the Secretary of Labor. An individual who negligently fails to do so must pay a penalty of $250 for each such failure. Individuals who intentionally or fraudulently fail to provide the notice may be subject to a penalty of 110% of the premium or $250, whichever is greater.
PAYING FOR PREMIUM ASSISTANCE
The government will pay for the entire amount of the subsidy through a mechanism involving tax credits available to “the person to whom premiums are payable.” That person is:
- In the case of a multiemployer plan (i.e., collectively bargained union plan), the plan.
- The employer maintaining the plan, in the case of a plan that is not a multiemployer plan but is subject to COBRA pursuant to federal law, or under which some or all the coverage is not provided by insurance.
- The insurance company in all other cases. Presumably, this refers to small employers with insured coverage under State law.
The statute does not specifically address how the subsidy will work for employers who are part of a MEWA.
The amount of premium involved may be taken as a credit against the Medicare taxes payable by the entity involved. The details of how this process will work will be forthcoming.
If an AEI has already paid premium that is subject to the subsidy, the person receiving the premium must refund it to the AEI within 60 days after the date the payment was made. This appears to be an affirmative obligation so employers that are subject to the subsidy rules will need to find a way to identify AEIs that are entitled to reimbursements.
There are many. We hope that most will be answered when the government issues regulations, guidance, and model notices.
In the interim, employers who qualify as a “person to whom premiums are payable” would do well to begin creating a census of individuals who are or may be AEIs as time frames for compliance will be very short.