On March 11, 2021, President Joe Biden signed the American Rescue Plan Act of 2021 (ARP) designed to help workers impacted by the COVID-19 pandemic. The ARP includes temporary COBRA premium assistance (paying 100% of the applicable COBRA premium) to eligible individuals. The premium assistance applies to periods of health coverage on or after April 1, 2021 through September 30, 2021.
Employers will need to take on additional responsibilities to comply with ARP, including identifying eligible individuals, contacting terminated employees who are eligible for the premium subsidy, and updating COBRA notices to comply with new requirements.
What health plans are affected?
The COBRA premium assistance provisions apply to all group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules under the Employee Retirement Income Security Act of 1974 (ERISA). They also apply to plans sponsored by State or local governments subject to the continuation provisions under the Public Health Service Act. The premium assistance is also available for group health insurance required under state mini-COBRA laws.
Who is Eligible?
Assistance Eligible Individuals (AEIs) are eligible for premium assistance if they are eligible for and elect COBRA continuation coverage because of their own or a family member’s reduction in hours or if they were involuntarily terminated from employment.
If an AEI declined to take COBRA continuation coverage, or elected Federal COBRA continuation coverage and later discontinued it, they may have another opportunity to elect COBRA continuation coverage and receive the premium assistance if the maximum period they would have been eligible for COBRA continuation coverage has not yet expired.
An AEI is a COBRA qualified beneficiary who meets the following requirements during the period from April 1, 2021 through September 30, 2021:
Is eligible for COBRA continuation coverage by reason of a qualifying event (not including a voluntary termination); and
Elects COBRA continuation coverage.
Who is not eligible?
Individuals not eligible for the COBRA premium subsidy include:
Those that are eligible for other group health coverage (not including excepted benefits, a qualified small employer health reimbursement arrangement (QSEHRA), or a health flexible spending arrangement (FSA))
Individuals eligible for Medicare
Individuals that were terminated for gross misconduct
Employer Requirements
Employers required to offer COBRA coverage must provide employees and their beneficiaries with written notice of their COBRA continuation coverage eligibility and to receive the premium assistance. The notice should also include all forms necessary for enrollment including forms that indicate that the individual is an AEI that is not eligible for another group health plan (this does not include excepted benefits, a QSEHRA, or a health FSA), or eligible for Medicare.
The notices must include the following information:
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.
For more information about ARP, see the FAQS about COBRA premium assistance under the American Rescue Plan Act of 2021 or the SHRM article, New COBRA Subsidy Requires Quick Action by Plan Sponsors.
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