The American Rescue Plan of 2021 (ARPA), which was recently signed into law by President Biden, contains several provisions designed to assist employers and employees in the wake of the COVID-19 pandemic. Among other things, Section 9501 of ARPA establishes a 100% premium subsidy under the Consolidated Omnibus Budget Reconciliation Act (COBRA), as well as additional COBRA enrollment rights for certain employees.
In general, COBRA requires all group health plans sponsored by private employers to offer temporary continuation of coverage to employees and their families when such coverage would otherwise be lost due to certain events (e.g., voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, and divorce). Under ARPA, certain Assistance Eligible Individuals (AEIs) who choose COBRA continuation coverage are not required to pay their monthly premiums for medical, dental, or vision insurance. Instead, for a six-month period — April 1, 2021 to Sept. 30, 2021 — employers must offer a 100% premium subsidy to AEIs.
Importantly, while ARPA offers this new six-month premium assistance period (ARPA Assistance Period), it does not extend the maximum COBRA coverage period, which is generally limited to 18 months. Moreover, while ARPA provides premium assistance to individuals who elect continuation coverage under comparable state (mini-COBRA) laws, it does not change any requirement of those state continuation programs.
Other key components of COBRA under ARPA are summarized below.
Assistance Eligible Individuals
Under ARPA, AEIs are individuals who qualify for COBRA because they (1) were involuntarily terminated or experienced a reduction in hours, and (2) are receiving COBRA coverage during the ARPA Assistance Period. Additionally, ARPA permits individuals to retroactively elect coverage if they would have otherwise qualified as AEIs before the ARPA Assistance Period and are still within their 18-month maximum COBRA coverage period. This is permitted even if an individual had previously discontinued, declined, or failed to timely elect COBRA coverage.
As previously stated, AEIs are not required to pay their COBRA continuation coverage premiums under ARPA. Instead, employers must pay the premiums, and if any AEIs have already made premium payments during the ARPA Assistance Period, employers must provide them with refunds within 60 days of their electing COBRA coverage. The federal government will ultimately reimburse employers for their COBRA premium payments through a refundable credit against Medicare payroll taxes. If the credit exceeds the amount of Medicare taxes owed, the credit is refundable as an overpayment. Premium assistance is no longer available to AEIs once the ARPA Assistance Period ends, but it may be cut off sooner if the AEI becomes eligible under a different plan, including Medicare, or the AEI’s maximum COBRA coverage period ends.
ARPA requires employers to provide current and former employees with certain notices explaining their COBRA rights. The required notices are as follows:
- A general notice to AEIs of premium assistance and other information about their rights under ARPA. This notice may accompany a COBRA election notice following a COBRA qualifying event or may be provided separately.
- A notice of the extended COBRA election period to individuals who have experienced a qualifying event prior to April 1, 2021. This notice must be provided by May 31, 2021.
- A notice of expiration of periods of premium assistance — explaining that the premium assistance for the individual will expire soon, the date of the expiration, and that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan. This notice must be provided 15–45 days before the assistance expires.
ARPA additionally sets forth the specific information that must be contained in COBRA notices. Notices must include:
- The necessary forms for establishing premium assistance eligibility.
- Contact information for the administrator responsible for maintaining premium assistance information.
- A description of the additional, retroactive election period (if applicable to the individual).
- A description of the requirement that the AEI notify the plan when they become eligible for coverage under another group health plan (not including excepted benefits, a QSEHRA, or a health FSA), or eligible for Medicare, and the penalty for failing to do so.
- A description of the right to premium assistance and the conditions for eligibility.
- A description of the option to enroll in a different coverage option available under the plan, if offered by the employer.
Model notices are available on the U.S. Department of Labor’s (DOL) official website. Unless specifically modified by ARPA, the existing requirements for the manner and timing of COBRA notices continue to apply. Any health coverage-related extensions under the Joint Notice and EBSA Disaster Relief Notice 2021-01 do not apply to COBRA notices issued under ARPA. Employers that do not comply with COBRA notice requirements under ARPA are subject to tax penalties.
Because subsidies became available on April 1, 2021, employers must promptly implement COBRA provisions set forth by ARPA. As employers make these changes to their policies, they should stay abreast of any further DOL guidance as it becomes available.