COBRA Premium Assistance under the American Rescue Plan Act of 2021

 

The American Rescue Act of 2021 (ARPA) is the latest federal law addressing the economic impact of the COVID-19 pandemic. Disruption in employment-based health coverage has been particularly difficult during the pandemic for many individuals. Although eligible employees can elect continuation of coverage under COBRA, the high premium cost makes it difficult for most people to afford it. Employees typically lose their group health coverage if their work hours are reduced to part-time status or if they are furloughed or terminated. Fortunately ARPA offers relief by providing a federal subsidy equal to the entire COBRA premium cost (yes, 100%) for up to six months from April 2021 through September 2021 and covers most medical, dental and vision plans for eligible individuals.

 

Who is eligible for the subsidy?

Persons eligible for the subsidy are called assistance eligible individuals or AEIs. An AEI must meet all of the following conditions:

  • Loses or lost group health coverage because of the employee’s:
    • Reduction in hours; or
    • Involuntary termination of employment (except for gross misconduct);
  • Is eligible for continuation coverage under the federal COBRA law or a state’s mini-COBRA law;
  • Is not eligible for:
    • Other group health coverage (but excepted benefits such as limited-scope dental or vision plans, health flexible spending accounts (HFSAs), and qualified small employer health reimbursement arrangements (QSEHRAs) are disregarded); or
    • Medicare

In order to comply with the law and satisfy new notice requirements, ARPA requires group health plans to provide notices to AEIs who are losing their health care coverage and are eligible for COBRA premium assistance by May 31, 2021. It will also be necessary to identify and notify AEIs, who were previously terminated and not currently enrolled in COBRA (but who are now eligible for the premium subsidy). This notice may be provided separately or by using a revised COBRA election notice. Employers can begin using the new notices immediately.

 

Employers may lean on their COBRA administrator for assistance with compliance regarding these new notice requirements. The U.S. Department of Labor (DOL) posted on its website guidance and model notices to help employers comply with the federal COBRA premium subsidy. Please reference the following links for additional guidance, forms and FAQs.

https://www.dol.gov/general/american-rescue-plan

https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy

 

 

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