Pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA), an individual who was covered by a group health plan may be able to elect continuation coverage upon the occurrence of a qualifying event, such as termination of employment or reduction in hours that results in a loss of coverage under the plan. Such qualified beneficiaries are entitled to notice from the group health plan explaining their COBRA rights.
The American Rescue Plan Act of 2021 (ARPA), signed into law on March 11, 2021, contains a provision that allows for COBRA premium assistance to help Assistance Eligible Individuals continue their health benefits at no cost to them. Similarly, assistance is available for continuation coverage under certain state laws as well. Such premium assistance under ARPA applies to periods of health coverage on or after April 1, 2021 through September 30, 2021. To make up for the lack of premiums received by the employer or plan, ARPA provides a tax credit for the corresponding amount.
Assistance Eligible Individuals include those qualified beneficiaries who meet the following requirements between April 1 and September 30, 2021:
- are eligible for COBRA continuation coverage due to a reduction in hours or an involuntary termination, except for gross misconduct; and
- elect COBRA continuation coverage.
Reductions in hours that qualify include reductions arising out of a change in a business’s hours of operations, a change from full-time to part-time status, a temporary leave of absence, or participation in a lawful labor strike. The individual must remain an employee at the time of the reduction. Individuals become ineligible for COBRA – and are therefore not eligible for premium assistance – if they are eligible for other group health coverage (through a new employer or their spouse, with limited exceptions). Individuals with coverage through the Health Insurance Marketplace® or who have Medicaid may be eligible for ARPA premium assistance. Individuals who elect to enroll in COBRA continuation coverage with premium assistance will not be eligible for a premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit for health coverage during that period. The IRS has not yet issued specific guidance on how this credit will operate, but the credit will be taken against either the payer’s Medicare Hospital Insurance Tax obligation or the similar Railroad Retirement Assistance Tax.
In addition, certain individuals may be eligible for an additional election opportunity if their qualifying event was a reduction in hours or involuntary termination prior to April 1, 2021, if they did not elect COBRA continuation coverage when it was first offered or if they elected such coverage but are no longer enrolled. Employers and plans must provide a specific notice to such individuals informing them of their right to make this additional election. Such notices must be provided by May 31, 2021. Notably, while ARPA provides for COBRA premium assistance even for employees whose eligibility began prior to April 1, 2021, whether they are currently receiving COBRA or not, it does not extend an individual’s eligibility period. Some individuals may be eligible for premium assistance during part, but not all, of the applicable assistance period.
An additional notice must be provided to eligible individuals who have elected coverage when their assistance period is coming to an end. This notice is required whether the individual’s assistance is ending due to expiration of their COBRA eligibility or the end of the assistance period on September 30, 2021. This notice must be sent within a window of 15-45 days prior to the expiration of their premium assistance.
Model notices as required by ARPA are available from the Department of Labor (https://www.dol.gov/cobra-subsidy). Employers are advised to review the COBRA notices they currently are using to determine their compliance with the new requirements. In addition, employers should determine which, if any, individuals may be entitled to receive notice under the new law. It will be important to provide accurate notice to all assistance eligible individuals, as penalties may be assessed against any employer who fails to provide the required notices.
The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.