On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law by President Joe Biden. In addition to many other benefits and programs, this law includes COBRA subsidies for a wide range of individuals.
This — as is to be expected with any healthcare-related legislation — creates many questions for employers and employees alike.
In the following post, we map out the basics of the ARPA COBRA subsidy and outline its potential impact on small businesses.
WHAT IS IT?
Also known as the COVID-19 Stimulus Package, the American Rescue Plan Act of 2021 is a $1.9 trillion economic stimulus bill. Passed by the 117th United States Congress and signed into law by President Joe Biden, it’s an attempt to speed up recovery from the economic and health effects of the COVID-19 pandemic.
As part of this multi-tiered program, certain COBRA beneficiaries can now participate in COBRA continuation coverage at no cost to them.
This COBRA subsidy is available from April through September of 2021, but it will end sooner if Assistance Eligible Individuals (AIEs) become eligible for other group health plan coverage or Medicare. (Or if those individuals exhaust their maximum coverage period.)
WHO IS ELIGIBLE?
The following individuals must be allowed to participate in COBRA continuation coverage at no cost for April through September 2021, so long as they are not eligible for other group health plan coverage or Medicare:
- Individuals who are offered federal COBRA or state continuation due to an involuntary termination of employment or reduction in hours that occurs April through September 2021.
- Individuals who were offered federal COBRA or state continuation due to an involuntary termination of employment or reduction in hours and who are currently COBRA participants (those who have elected continuation coverage and are making monthly premium payments).
- Individuals who were offered federal COBRA or state continuation due to an involuntary termination of employment or reduction in hours, chose not to elect COBRA, or elected and then dropped it, but are still within their maximum COBRA coverage period.
HOW DOES THIS IMPACT EMPLOYERS?
First, employers are responsible for complying with all notice requirements for eligible former employees during the subsidy period.
For group health plans subject to federal COBRA, employers are responsible for:
- Notifying AEIs
- Providing the coverage at no cost
- Requesting a refund for the COBRA premiums not paid against the employer’s Medicare portion of the payroll taxes
For group health plans subject to state continuation, the carrier should take responsibility for providing the coverage and requesting a payroll tax credit.
Employers will be eligible for a refundable tax credit to offset the amounts paid under the ARPA’s COBRA subsidy.
Obviously, ARPA has had significant impacts on employers’ obligations and responsibilities regarding compliance requirements for COBRA coverage. The Department of Labor (DOL) has provided three new model notices, along with a COBRA subsidy summary and certification form. In addition, there is a notice outlining how to inform AEIs who elect the COBRA subsidy before the subsidy ends. Further guidance from the DOL and IRS is expected within the coming weeks.
DON’T NAVIGATE IT ALONE
The COBRA Assistance program creates a short-term, affordable health insurance option for many Americans impacted by the pandemic economic slowdown. But it also places an additional onus on employers. As with any change or update in health care legislation, it creates several questions for employers and employees alike.
If you’re a small business owner or HR professional that would like help determining exactly how you can best take advantage of this, or any similar benefits-related opportunity, contact Health & Benefits Partners today. Our experienced, knowledgeable, and empathetic team can help you find the path that’s right for you.