American Rescue Plan offers Subsidized COBRA Premiums
Certain Individuals Are Eligible To Return to your Insurance Plan(s), March 11, 2021
On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (ARPA). The Act was designed to offer relief to individuals that have been adversely affected by the COVID-19 pandemic. Section F of the Act addresses how to assist these individuals with health insurance premiums while they are unemployed and unable to afford coverage. Like in the American Recovery and Reinvestment Act (ARRA) passed in 2009, the government saw employers as one of the best vehicles for bringing health insurance to affected individuals. COBRA was temporarily changed requiring employer involvement with providing these benefits.
The law requires employers to provide a notice to former employees that experienced an involuntary termination of employment (for reasons other than "gross misconduct") or a reduction in work hours leading to a loss of group (or state continuation) coverage by May 31, 2021. These notices must be sent to these individuals dating back to 10/02/2019 (or longer based upon state continuation laws). The notice explains who is eligible for the “free” coverage (medical, dental, vision, HRAs, but not FSAs or life insurance) from April 1, 2021 to September 30, 2021. If an individual is eligible, he/she must “elect” to receive the free coverage within sixty days by completing the election forms.
Employers must pay insurance companies for the premiums and receive a tax credit on their quarterly 941 tax return. Individuals electing to receive the "free" coverage may continue on the group plan(s) until the date COBRA would have ended (usually 18 months from their COBRA start date) had they elected and continued to make premium payments. Regardless, the subsidized premiums will end on September 30, 2021 (unless the federal government extends the time frame).
In addition, employers are also required to notify the individuals that elected the subsidized premiums the free coverage will be ending September 30, 2021 and a description of the premium costs that will be effective October 1, 2021. These letters must be sent between August 15 and August 31, 2021. Individuals receiving these notices are not required to complete any other forms; the letter is designed to explain the costs of COBRA coverage after September 30, 2021.
TIP: Upon reviewing the new Act, we anticipate 20% of the affected individuals would take advantage of the free coverage for 6 months. Based upon early response, we have seen less than 3% actually qualify and elect the insurance. (These numbers vary based upon the employer's industry). For further assistance, subscribe to this website and receive the best in COBRA compliance administration.
Department of Labor Frequently Asked Questions