2021 American Rescue Plan Offers COBRA Continuation Coverage Subsidies
On March 11, 2021, President Joe Biden signed the American Rescue Plan Act of 2021 (ARPA), which provides additional economic relief during the COVID-19 pandemic. The ARPA is the latest in a series of coronavirus relief bills and includes $1.9 trillion dollars to aid individuals, schools, businesses, and state and local governments impacted by the pandemic. In addition to the direct payment of stimulus checks of up to $1,400 to qualifying Americans, the ARPA also included an unemployment benefit expansion, funds for rental and utility assistance, funding for the COVID vaccination roll out, and expanded child tax credits.
In addition to these forms of relief, the ARPA made drastic—albeit temporary—changes related to COBRA health insurance, including requiring certain employers to offer free COBRA coverage to qualifying individuals. This expansion of COBRA continuation coverage comes at a pivotal time as many employees are facing job loss—including the loss of employee benefits—as a result of the COVID-19 pandemic.
Overview of COBRA Health Insurance Coverage
COBRA (short for the Consolidated Omnibus Budget Reconciliation Act) allows qualified employees and their families—referred to as “qualified beneficiaries”—who would otherwise lose their group health coverage due to certain life events—referred to as a “qualifying events”—to temporarily continue their group health coverage. Not all employers are subject to COBRA. Rather, COBRA generally applies to all group health plans maintained by private-sector employers with 20 or more employees, or by state or local governments.
While these employers must offer COBRA continuation coverage, they are not required to continue subsidizing the cost of the former employee’s health insurance coverage, meaning most employers stop paying their portion of the former employee’s health insurance premium once that individual elects COBRA continuation coverage. In other words, the qualified beneficiary must pay the full cost of COBRA continuation coverage.
On average, COBRA health insurance premiums cost $569 per month for individual coverage and $1,595 per month for family coverage. At a time when an individual is already facing financial hardship due to job loss, these costs can be devastating. Luckily, the ARPA provides significant relief to American workers facing the loss of their health insurance.
Free COBRA Health Insurance Coverage Under ARPA
Section 9501 of the ARPA preserves health benefits for workers by providing premium assistance for COBRA continuation coverage for individuals and their families.
Certain Employers Must Offer Free COBRA to Assistance Eligible Individuals
Specifically, employers subject to COBRA (or comparable state continuation programs, commonly referred to as “mini-COBRA laws”) must offer free COBRA coverage to “Assistance Eligible Individuals.” An “Assistance Eligible Individual” is one who:
• is a qualified beneficiary;
• is eligible for Cobra continuation coverage due to either:
o the employee’s involuntary termination (other than by reason of the employee’s gross misconduct); or
o reduction in number of hours of employment; and
• elects COBRA continuation coverage.
Maximum Continuation Periods Apply to Free COBRA Recipients
Free COBRA coverage under ARPA can last from April 1, 2021 to September 30, 2021. However, it will end earlier if the covered individual reaches the end of their maximum COBRA continuation coverage period prior to September 30, 2021.
For individuals eligible for COBRA coverage due to their involuntary termination or reduction in the number of employment hours, the maximum period of COBRA coverage is 18 months. (As a reminder, when an individual reaches the end of their maximum COBRA coverage period, they become eligible for a special enrollment period for health insurance coverage through the ACA Health Insurance Marketplace.)
Recipients of Other Group Health Insurance Options Ineligible for Free COBRA
Additionally, as with regular COBRA coverage, an Assistance Eligible Individual loses eligibility for the subsidized COBRA continuation coverage under the ARPA if they become eligible for other group health insurance coverage or Medicare. (Failing to notify your plan that you have become eligible for coverage under another group health plan or for Medicare can result in tax penalties.)
Employers Receive Tax Credit Subsidies for Providing COBRA Coverage
Employer that are required to provide free COBRA coverage to Assistance Eligible Individuals are eligible to receive reimbursement for such subsidies by applying for a federal tax credit. In most cases, the employer will be reimbursed through tax credits against their quarterly payroll taxes.
Special COBRA Election Rights for Eligible Workers
Assistance Eligible Individual who first become eligible for COBRA continuation coverage between April 1, 2021 and September 30, 2021 must elect COBRA coverage within 60 days of their receipt of the General Election Notice (see below).
If the Assistance Eligible Individual fails to elect COBRA coverage within that 60-day period, they forfeit their right to the COBRA coverage subsidy. However, they may still be eligible to elect COBRA coverage—albeit without the subsidy— in reliance on the Department of Labor’s 2020 guidance that extended the deadline by which eligible employees must elect COBRA coverage.
Under the ARPA, Assistance Eligible Individuals who:
(1) either previously elected but discontinued COBRA coverage before April 1, 2021 OR previously declined COBRA coverage, and
(2) are still within their COBRA coverage eligibility period
are given another opportunity to enroll in free COBRA coverage. To do so, they must elect COBRA coverage within 60 days of their receipt of the Special Election Notice (see below).
COBRA Notice Requirements Under ARPA
ARPA also requires group health plans to provide three different types of notices to ensure individuals are informed of the COBRA premium assistance that may be available to them.
1. General Election Notice
The General Election Notice must be provided to Assistance Eligible Individuals who first become eligible for subsidized coverage between April 1, 2021 and September 20, 2021. The notice is intended to inform the Assistance Eligible Individual of the availability of COBRA premium assistance and important details related to this subsidized coverage.
2. Special Election Notice
Prior to May 31, 2021, the Special Election Notice must be provided to Assistance Eligible Individuals who:
(1) previously elected but discontinued COBRA coverage before April 1, 2021 or who previously declined COBRA coverage; and
(2) are still within their COBRA coverage eligibility period
Like the General Election Notice, the Special Election Notice informs Assistance Eligible Individuals of the availability of COBRA premium assistance and important details related to this subsidized coverage.
3. Expiration of Subsidy Notice
The Expiration of Subsidy Notice is intended to inform Assistance Eligible Individuals that their free COBRA coverage is soon coming to an end. This notice must be provided at least 15 days before the subsidy expires but not sooner than 45 days before the subsidy expires. Notably, this notice is not required if the Assistance Eligible Individual becomes ineligible for free COBRA coverage because they’ve become eligible for other group health insurance coverage or Medicare.
Contact Hawks Quindel for Help with COBRA Health Insurance Benefits
The attorneys at Hawks Quindel are committed to ensuring that Wisconsin workers receive the health insurance benefits to which they are entitled under the ARPA. If you have questions regarding your eligibility for COBRA premium subsidies, contact our office at 608-257-0040 or submit our client inquiry form.