On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA). Among the most significant changes for employers are the provisions related to COBRA. The ARPA provides assistance-eligible individuals (AEI) with the opportunity for a 100 percent subsidy for COBRA premiums between April 1, 2021 and September 30, 2021 (the Subsidy Period).
AEI include all COBRA qualified beneficiaries who are eligible for COBRA continuation coverage due to an involuntarily termination (or a reduction of hours) during the Subsidy Period and individuals who would have been AEI, but previously dropped or declined such coverage (i.e., their maximum COBRA coverage period would have extended beyond April 1, 2021). This is true regardless of whether their termination was related to the pandemic. In other words, any individual who qualified for COBRA because of an involuntary termination or reduction in hours with a coverage period that would have extended beyond April 1, 2021, is now eligible to elect coverage and take advantage of the subsidy. Employers (or their plan administrators) must provide updated COBRA notices to AEI. The Department of Labor is required to issue a model notice within the next thirty days. AEI will have sixty days from receipt of the notice to elect COBRA coverage, which will be retroactive to April 1, 2021.
Practically, depending on the structure of the employer-sponsored plan, this means that the employer, plan, or insurer, will be required to pay the cost of the AEI’s COBRA premium and then claim the amount as a credit against its quarterly Medicare payroll tax.
Importantly, the bill does not extend the individual’s COBRA coverage period, so the subsidy will last through the earlier of: (i) September 30, 2021; or (ii) the end of the AEI’s otherwise applicable COBRA coverage period. Individuals who qualify for COBRA for other reasons, such as a voluntary termination, do not qualify for the subsidy. Eligibility for the subsidy also expires upon the AEI’s eligibility for other group health coverage or Medicare.
Further guidance is expected to clarify some of the lingering questions about these issues. In the meantime, if you have any questions about these changes, or other issues impacting your workforce, Reed Smith’s experienced attorneys are available to assist.