The recently enacted American Rescue Plan Act (“ARP”) contains an important provision affecting all private employers with 20 or more employees (and all Michigan governmental employers) that sponsor employee health insurance plans. Below we very briefly summarize essential aspects of the new law and its most immediate impact on the obligations of employers and COBRA administrators.
Under COBRA – the Consolidated Omnibus Budget Reconciliation Act of 1985, for those too young to remember that “COBRA” is not some weird reptilian reference to a health benefit – most workers and their dependents who lose group health plan coverage due to the employee’s loss of employment, death or reduction in hours, or as a result of divorce, are able to elect to continue that coverage for a period of time. However, the employee or beneficiary must pay the cost of that coverage. ARP provides for a COBRA subsidy for COBRA eligible persons who elect COBRA coverage for any part of the period between April 1 and September 30, 2021. In substance, ARP eliminates the cost of COBRA coverage for the next six months. Instead, the employer/plan sponsor must pay that cost, but it then receives a tax credit in an equal amount – similar to the arrangement that funded employer wage continuation payments at the beginning of the COVID pandemic.
In a nutshell, here’s what you need to get started in understanding how this may impact your employees and health benefit plan:
- If you have employees or other plan beneficiaries who experience a “qualifying event” (other than as a result of a voluntary termination) between April 1 and October 1, 2021, the new subsidy will apply to any election of COBRA coverage.
- If you have COBRA-eligible participants (other than those eligible as a result of a voluntary termination) on April 1, 2021, the new subsidy will apply to their coverage cost until their COBRA eligibility ends or October 1, 2021, whichever comes first.
- If you have former plan participants who were COBRA-eligible (other than as a result of a voluntary termination) but who declined continuation coverage at the time of their qualifying event or who elected but later dropped COBRA coverage, they must be permitted to re-visit their election as of April 1, 2021 provided they otherwise remain eligible to receive COBRA coverage (i.e., they have not become eligible in the interim for alternative coverage through a new employer or family member or Medicare).
- Employers are required to send notices no later than May 31, 2021 to all persons who could have been receiving COBRA continuation coverage as of April 1, 2021 (i.e., those persons who declined COBRA coverage when offered it or who accepted COBRA coverage but later terminated it for reasons other than becoming eligible for alternative coverage) informing them of their “re-election” right.
- Employers are required to notify new COBRA-eligible participants of the subsidy (preferably as part of any new COBRA notice but for COBRA notices already sent out, then through the additional notice).
- Employers are required to notify COBRA recipients who are receiving the COBRA subsidy when the subsidy is expiring and of their payment obligations to continue COBRA coverage after that.
Because identifying persons who get the second bite at electing coverage may be a time consuming process, employers are well-advised to get started now. There are many details to this program and more questions than we can answer here. We have included below links to several DOL publications and forms that are important to understanding and implementing this program and its employer requirements. Hopefully these will answer most of your questions. However, if you have questions or would like further guidance or assistance in implementing this new mandate and program, please contact any member of our Employment Law Team.
- FAQs About COBRA Premium Assistance Under ARP
- Model General Notice and COBRA Continuation Coverage Election Notice
- Model COBRA Continuation Coverage Notice for Extended Election Periods
- Model Alternative Notice of ARP Continuation Coverage Election
- Notice of Expiration of Period Premium Assistance
- DOL’s Summary of COBRA Premium Assistance Provisions