American Rescue Plan Act of 2021 – COBRA Premium Subsidy
On March 11, 2021, President Biden signed The American Rescue Plan Act of 2021 (ARPA), a law to enact President Biden's COVID-19 relief package passed by Congress. The new law creates a 100% COBRA premium subsidy and additional COBRA enrollment rights for certain employees and their families. The subsidy will be provided by the federal government via payroll tax credits for employers.
If PBA provides COBRA administration services for you, all notice requirements relating to this premium subsidy will be provided at no cost. Your PBA Enrollment Representative will contact you to obtain a list of individuals who are eligible for the subsidy. The subsidy is only for employees (and their families) who are, or become, COBRA eligible due to involuntary termination of employment or reduction in hours within the subsidy period. This means individuals who lost coverage due to involuntary employment termination or reduction in hours from November 2019 should be included on the list as their 18 months of COBRA eligibility would run through April 2021. ARPA permits (but does not require) you to allow employees to choose a group health plan that is less costly from the plan the individual is currently enrolled if you offer different coverage options to active employees. PBA will assume this option will not be made available to employees, unless advised otherwise, since this is not currently provided to eligible COBRA enrollees.
If PBA does not provide COBRA administration services for you, you are responsible for all requirements relating to the ARPA COBRA premium subsidy.
A summary of the ARPA COBRA subsidy requirements is provided below. ARPA requires the Department of Labor to release Model Notices and further guidance relating to these subsidy provisions. PBA will provide you with updated guidance when this information becomes available from the Department of Labor.
COBRA Premium Subsidy
The COBRA premium subsidy is for coverage continuation during the period beginning on April 1, 2021, and ending on September 30, 2021. The subsidy is only for employees (and their families) who have lost group health coverage due to an involuntary termination of employment or reduction in hours - the subsidy is not available for employees who terminate employment voluntarily.
For eligible COBRA enrollees who experienced an involuntarily termination of employment or reduction in hours (referred to as assistance eligible individuals or AEIs), the subsidy begins on April 1, 2021 and ends on the earlier of (i) the individual’s maximum period of COBRA coverage (generally 18 months) or (ii) September 30, 2021. The subsidy will also end early if the individual becomes eligible for coverage under another group health plan or Medicare. ARPA subjects individuals to a penalty of $250 if they fail to notify their former employer when they become eligible for other coverage. If the failure to notify is deemed to be intentional, the penalty is the greater of $250 or 110% of the subsidy amount.
Extended Enrollment Period
AEIs who do not have a COBRA election in effect on April 1, 2021, and those who elected COBRA but discontinued coverage before April 1, 2021, are eligible for the subsidy if they are still within their COBRA maximum coverage period. These individuals must be given a special enrollment period beginning on April 1, 2021, and ending 60 days after they are provided the required notification. COBRA coverage elected during the special election period will begin as of the first coverage period beginning on or after April 1, 2021, and may not extend beyond the AEI’s original maximum coverage period.
There are new notice requirements under ARPA which are summarized below. The Department of Labor is required to issue model notices to aid employers with these requirements. Model notices to notify eligible individuals of the availability of assistance and the availability of an extended enrollment period are expected from the Department of Labor within 30 days of ARPA’s March 11, 2021 enactment; a separate model notice regarding the expiration of the subsidy is expected within 45 days from enactment.
Employer Notices Required to be Provided to Assistance-Eligible Individuals (“AEIs”)
Group health plans must provide the following notices to AEIs:
The Notice of Assistance Availability is designed to inform AEIs of the availability of the subsidy and the option to enroll in different coverage (if permitted by the employer). The notice must be provided to individuals who become eligible to elect COBRA during the period beginning on April 1, 2021, and ending on September 30, 2021. Employers must provide a revised COBRA notice to all individuals that may be eligible for the subsidy. This will require employers to amend their current COBRA notice and election forms. To aid employers, new model COBRA forms will be issued by the Department of Labor.
The Notice of Extended Election Period must be provided to eligible individuals who haven’t elected COBRA by April 1 and those who elected COBRA coverage but then discontinued it. These individuals may elect COBRA coverage during an enrollment period starting April 1 and ending 60 days after the date on which the notice regarding the subsidy is provided. This notice must be provided to individuals eligible for an extended election period by May 30, 2021.
ARPA permits, but does not require, employers to permit employees to choose a different group health plan than the individual’s current plan. The premium for the new plan cannot be higher than the premium for the employee’s previous plan, among other restrictions. If allowed by the employer, the employee would have 90 days from the date of their COBRA notice to make a new election.
The Notice of Expiration of Subsidy must be provided during the period that is between 15 and 45 days before the date on which an individual’s subsidy will expire, unless the subsidy is expiring because the individual has gained eligibility for coverage under another group health plan or Medicare.
Individual Notice to Group Health Plan
AEIs (plan participants) must notify the group health plan if they cease to be eligible for the subsidy because they become eligible for another group health plan or Medicare.
If you have any questions, please contact your Enrollment Representative at 800-435-5694.