COBRA and the American Rescue Plan Act

COBRA provisions play critical role in COVID-19 relief law

During the COVID-19 pandemic, many employees and their families have lost group health plan coverage. If your business has had to take such steps, and it’s required to offer continuing health care coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The recently passed American Rescue Plan Act (ARPA) includes some critical provisions that you should be aware of.

100% subsidy

Under the ARPA, assistance-eligible individuals (AEIs) may receive a 100% subsidy. This is for COBRA premiums during the period beginning April 1, 2021, and ending on September 30, 2021.

An AEI is a COBRA qualified beneficiary. In other words, an employee, former employee, covered spouse or covered dependent. Who is eligible for and elects COBRA because of a qualifying event of involuntary termination or reduction of hours. For purposes of the law, the subsidy is available for AEIs for the period beginning April 1, 2021t through September 30, 2021.

Extended election period

Individuals without a COBRA election in effect on April 1, 2021, but who would be an AEI if they did, are eligible for the subsidy. Those who elected but discontinued COBRA coverage before April 1, 2021, are also eligible. If they’d otherwise be an AEI and are still within their maximum period of coverage.

Individuals meeting these criteria may make a COBRA election during the period beginning on April 1, 2021, and ending 60 days after they’re provided required notification of the extended election period. Coverage elected during the extended period will commence with the first period of coverage beginning on or after April 1, 2021, and may not extend beyond the AEI’s original maximum period of coverage.

Duration of coverage

As explained, the subsidy is available for any period of coverage in effect between April 1, 2021, and September 30, 2021. However, eligibility may end earlier if the qualified beneficiary’s maximum period of coverage ends before September 30, 2021. Eligibility may also end if the qualified beneficiary becomes eligible for coverage under Medicare or another group health plan other than coverage consisting of only excepted benefits or coverage under a Health Flexible Spending Arrangement or Qualified Small Employer Health Reimbursement Arrangement.

Other provisions

The ARPA’s COBRA provisions go beyond the subsidy. For example, they stipulate that group health plan sponsors may voluntarily allow AEIs to elect to enroll in different coverage under certain circumstances. In addition, group health plans must issue notices to AEIs regarding the:

Availability of the subsidy and option to enroll in different coverage (if offered),
extended election period, and
expiration of the subsidy.

The U.S. Department of Labor is expected to issue model notices addressing all three points.

Further explanation

The COVID-19 crisis has emphasized the importance of health care coverage. Ciuni & Panichi can further explain the ARPA’s COBRA provisions and help you manage the financial risks of offering health care benefits to your employees. For assistance contact us at 216.831.7171.