During the COVID-19 pandemic, many employees and their families have lost group health plan coverage because of layoffs or reduced hours. If your business has had to take such steps, and it is required to offer continuing health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), the recently passed American Rescue Plan Act (ARPA) includes some critical provisions that you should be aware of.
Subsidy for Assistance-Eligible Individuals (AEI)
Under the ARPA, AEIs may receive a 100 percent subsidy 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 coverage because of a qualifying event of involuntary termination of employment or reduction of hours. For purposes of the law, the subsidy is available for AEIs for the period beginning April 1, 2021 and ending 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 would 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 are 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 also may 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.
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
- Expiration of the subsidy
The U.S. Department of Labor is expected to issue model notices addressing all three points.
The COVID-19 crisis has emphasized the importance of health care coverage. Our firm can further explain the ARPA’s COBRA provisions and help you manage the financial risks of offering health care benefits to your employees.