On March 11, 2021, President Biden signed the American Rescue Plan (ARP) into law. The ARP is a $1.9 trillion economic stimulus bill designed to provide direct relief to Americans and to speed up recovery from the COVID-19 pandemic. Some of the well known elements of this bill included the $1,400 stimulus payments and the extension of the $300 weekly unemployment benefit through September 6, 2021. However, the ARP also provides for a federal COBRA subsidy that provides premium assistance to eligible individuals to continue their health benefits. On April 7, 2021, the Department of Labor (DOL) issued guidance and model notices implementing the premium assistance provisions.
COBRA is a health insurance program that provides workers and their dependents continued health benefits under their group health plan for a limited period of time after the worker has experienced certain qualifying conditions such as job loss, reduction in hours, job transition, death, or divorce. Typically, under COBRA, eligible individuals are responsible for paying the premium for coverage. However, under this provision of the ARP, eligible individuals who have experienced reduction in work hours or involuntary termination of employment on or after April 1, 2021 through September 30, 2021 will receive a full subsidy of their COBRA premiums.
Currently, the premium assistance is expected to end on September 30, 2021. However, a premium assistance for an eligible individual may end earlier if that individual becomes eligible for another group health plan, such as Medicare or a plan sponsored by a new employer or a spouse’s employer. Premium assistance may also end earlier than September 30, 2021 if the eligible individual reaches the end of their maximum COBRA continuation coverage period (typically 18 months).
Eligible individuals should receive notice from their employer of their eligibility to elect COBRA continuation coverage and receive premium assistance on the last day of employment. That notice should include the necessary forms for enrollment and forms that indicate eligibility to receive premium assistance under the ARP. The Department of Labor has released Model Notices for employers to use, all of which are accessible here.
There may be an additional election opportunity for qualified beneficiaries whose qualifying event was a reduction in hours or an involuntary termination prior to April 1, 2021 and who did not elect COBRA continuation coverage or who elected COBRA continuation coverage but is no longer enrolled. Individuals that fit into this category should receive notice of extended COBRA election period with information about this additional election opportunity. The notice must be provided by May 31, 2021 and individuals have 60 days after notice is provided to elect for COBRA continuation coverage.
The COBRA subsidy provisions in the ARP will also be available for state continuation coverage as well. Some states, such as Kentucky and Ohio, impose their own COBRA coverage requirements. The ARP COBRA assistance does not change any state requirements for continuation coverage programs. Rather, the law only allows eligible individuals who elect continuation coverage under state insurance law to receive premium assistance from April 1, 2021 through September 30, 2021.
The DOL plans to set up an external review process for employees who are not offered the subsidy but who believe that they are eligible. This review process will offer broad leniency to the employee.
Additional information about the COBRA subsidy under the ARP can be found here.
