The American Rescue Plan Act (ARPA) enacted in March 2021 provides up to 100% COBRA coverage for all individuals who have qualifying events, such as layoffs, during the pandemic. The government subsidy will reimburse the employer through tax credits for the period. Employers should be aware that formal notice must be given to all eligible employees by May 31, 2021. If employers fail to abide by the requirements of ARPA, they may be subjected to penalties of $100 per eligible person for each day the violation occurs under the Internal Revenue Code. Individuals then have 60 days after the notice to elect. Model notices and forms can be found on the DOL website or through your benefits provider.
Assistance Eligible Individuals are the individuals who lost or whose family member lost group health plan insurance due to a reduction of hours or an involuntary termination from employment. The loss of job does not need to be due to contracting COVID-19. Below is a list of examples of qualifying events provided by the Department of Labor:
- Reduction of hours due to change in business hours
- Change in status from full-time to part-time status
- Taking temporary leave of absence
- Individual’s participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced
- Involuntary termination (not including voluntary termination)
An individual experiencing the above events, so long as they elect continuation for coverage, can receive COBRA premium assistance.
Individuals may also qualify if they did not elect COBRA continuation coverage when it was first offered prior to April 1, 2021, and to those who elected COBRA continuation coverage, but are no longer enrolled (for example, dropping COBRA continuation coverage due to being unable to pay the premium). Individuals can begin their coverage prospectively from the date of their election, or if an individual has a qualifying event on or before April 1, 2021, choose to start their coverage as of April 1, 2021.
Duration of Coverage
The ARPA covers subsidizing employers for 100% of COBRA payments so that employees will have premium assistance from April 1, 2021 to September 30, 2021. However, an individual will no longer qualify once: (1) the employee becomes eligible for another group health plan; or (2) the employee reached the end of the max continuation coverage period.
If an individual is eligible as an Assistance Eligible Individual, the ARPA provides that the individual must be treated for purposes of COBRA, as having paid in full the amount of such premiums from April 1, 2021 through September 30, 2021. Employers may not collect premium payments from Assistance Eligible Individuals and subsequently require them to reimburse the covered period.