The COVID-19 pandemic has ravaged our nation and has had a particularly devastating effect on both employees and employers alike. In light of the disturbing impact on the livelihoods of millions of Americans, Congress passed the American Rescue Plan Act of 2021 (“ARPA”), which provides certain eligible individuals with six (6) months of free COBRA continuation coverage due to a qualifying event that is a reduction in hours or an involuntary termination of employment. Note, however, that a former employee who voluntarily quits, resigns, or retires cannot be considered an Assistance Eligible Individual (“AEI”).
For employers who were forced to reduce their workforce or drastically reduce employees’ hours, the ARPA provides that the government will cover 100% of an eligible individuals’ COBRA premiums, which will be directly reimbursed to the employer, plan administrator, or insurance company through a COBRA premium assistance credit. Generally, the government subsidies will apply for an AEI’s COBRA coverage during the period of April 1, 2021, through September 30, 2021. The ARPA does not lengthen the period during which COBRA coverage is provided.
Recent guidance issued by the U.S. Department of Labor (“DOL”) articulates that AEIs are COBRA qualified beneficiaries:
- whose COBRA qualifying event was either a reduction in hours or an involuntary termination of employment;
- who are not eligible for Medicare; and
- who are not eligible for coverage under any other group health plan, including a new employer’s group health plan or a spouse’s employer’s group health plan.
The ARPA further requires that group health plans must distribute a COBRA Notice that includes ARPA provisions to any COBRA qualified beneficiary who experiences any COBRA qualifying event (not simply a reduction in hours or involuntary termination of employment) on or after April 1, 2021, through September 30, 2021. Additionally, group health plans are required to notify AEIs of the date on which the ARPA subsidy will end and to provide information about other coverage for which they may be eligible (although without the ARPA subsidy). The ARPA increased eligibility for tax credits that may lower or eliminate an individual’s premium for health insurance marketplace coverage. More information regarding the ARPA’s COBRA subsidy requirements, and additional benefits afforded to aggrieved employees can be found at www.dol.gov/COBRA-subsidy.