Employers know that the Consolidated Omnibus Budget Reconciliation Act (COBRA) provides an opportunity for group health plan continuation coverage to covered employees and their families upon the occurrence of a qualifying event, such as a termination of employment or a reduction in hours. The recently enacted American Rescue Plan Act of 2021 (ARP) provides COBRA limited premium subsidies and new enrollment rights to certain Assistance Eligible Individuals. An Assistance Eligible Individual would not be required to pay COBRA premiums from April 1, 2021 through September 30, 2021. Instead, the premium would be paid directly by the employer, plan administrator or insurance company, which are then entitled to a tax credit for the amount of COBRA premium assistance.

The ARP defines “Assistance Eligible Individual” as a person who was covered by a group health plan on the day before a qualifying event. A “qualifying event” is a reduction in hours or an involuntary termination of employment. Employees who voluntarily terminate employment or who are terminated for gross misconduct are not eligible for COBRA premium assistance. Further, premium assistance is not available if the otherwise Assistance Eligible Individual is eligible for other group health coverage, such as through a new employer’s plan or a spouse’s plan, or eligible for Medicare.

Premium assistance is available for continuation coverage under the Federal COBRA provisions, as well as for group health insurance coverage under comparable state continuation coverage (mini-COBRA) laws, including California’s Cal-COBRA program.  

The opportunity to obtain COBRA premium assistance is not limited to Assistance Eligible Individuals who become eligible during the subsidy period of April 1, 2021 through September 30, 2021. Rather, Assistance Eligible Individuals who declined COBRA continuation coverage due to a reduction in hours, because they were involuntarily terminated, or if COBRA coverage was elected and later discontinued have another opportunity to elect COBRA coverage and receive premium assistance if the maximum period of their COBRA eligibility has not expired.  In addition, persons with individual health insurance coverage or Medicaid may be eligible for ARP premium assistance (although an election to enroll in COBRA continuation coverage with premium assistance for such persons will mean an end to any premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit during the premium assistance period). Note that the opportunity to elect COBRA coverage with premium assistance does not extend the maximum COBRA coverage period, which is generally 18 months from the employer’s reduction in hours or the involuntary termination.

Employers must provide Assistance Eligible Individuals certain required notices.  Model notices are available here. The required notices include: 

• A general notice to all qualified beneficiaries who have experienced a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021 through September 30, 2021. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
• A notice of the extended COBRA election period to any Assistance Eligible Individual (or any individual who would be an Assistance Eligible Individual if a COBRA continuation coverage election were in effect) who had a qualifying event before April 1, 2021. This requirement does not include those individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (generally, those with applicable qualifying events before October 1, 2019). This notice must be provided by May 31, 2021.
• The ARP also requires that plans and issuers provide individuals with 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. Coverage may also be available through Medicaid or the Health Insurance Marketplace®. This notice must be provided 15 - 45 days before the individual’s premium assistance expires.

In addition to the required notices, employers must provide the following:

• The forms necessary for establishing eligibility for the premium assistance;
• Contact information for the plan administrator or other person maintaining relevant information in connection with the premium assistance;
• A description of the additional election period (if applicable to the individual);
• A description of the requirement that the Assistance Eligible Individual notify the plan when he/she becomes 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 receive the premium assistance and the conditions for entitlement; and
• If offered by the employer, a description of the option to enroll in a different coverage option available under the plan.

Those with additional questions about ARP premium assistance may want to visit the Department of Labor’s “Frequently Asked Questions” page here.

The author would like to gratefully acknowledge the assistance of Joanne Warriner.

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