On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA). Section 9501 of ARPA provides a 100% premium subsidy to Assistance Eligible Individuals (AEI) to help them continue their health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA. The offering employer or plan will be entitled to a tax credit for the amount of the premium assistance. Under ARPA, AEI are COBRA-qualified beneficiaries who are eligible for COBRA continuation coverage because they lost their health insurance due to a reduction in their hours or an involuntary termination and have elected COBRA continuation coverage. Employees and their beneficiaries are not eligible for ARPA premium assistance if they resigned their employment or if they are eligible for other group health coverage or Medicare. Those AEI who have individual health insurance coverage like a plan through the Health Insurance Marketplace® or through Medicaid are also eligible for ARPA premium assistance. Unless extended, ARPA premium assistance will be offered from April 1, 2021, through Sept. 30, 2021, but will end earlier if the individual qualifies for another group health plan, is eligible for Medicare or reaches the end of their maximum COBRA continuation coverage period.
Through ARPA, Congress also offered an additional election opportunity for COBRA continuation coverage to qualified beneficiaries who met the criteria for continued health insurance due to a reduction in hours or an involuntary termination
prior to April 1, 2021, and who did not elect COBRA continuation coverage when it was first offered or who elected COBRA continuation coverage but let it lapse. Finally, ARPA also permits employees, whose employers have elected to offer the option, an opportunity to switch to a different health plan offered by the employer.
ARPA requires employers and plans offering continued group health insurance to provide notice of the availability of ARPA premium assistance. Congress required the U.S. Department of Labor (DOL) to create and publish model notices regarding ARPA’s subsidy assistance to guide these employers and plans. For employees and beneficiaries who lost coverage between Nov. 1, 2019, and April 1, 2021, employers have only until May 31, 2021, to provide notice of the subsidy assistance. For AEI who lost coverage after April 1, the notice periods appear unchanged. Employers must notify their plan administrators within 30 days of an individual’s qualifying event and the plan administrators then have 14 days to provide the appropriate notice and election forms to the individual. Should an employee elect COBRA coverage and receive the premium assistance, employers and plans must provide a notice within 15-45 days of the expiration of their subsidy.
On April 7, 2021, the DOL released its model notices and also additional guidance in the form of frequently asked questions to help employers and employees and their beneficiaries understand the
subsidy. The DOL released a
summary provision and four model notices:
- Notice for use with employees and beneficiaries who lost their coverage after April 1, 2021;
- Notice for use with employees and beneficiaries who lost their coverage after Nov. 1, 2019, and before April 1, 2021, but either failed to elect to continue their coverage or let it lapse;
- Notice for use by employers that have less than 20 employees; and
- Notice for use with employees and beneficiaries to advise them of the expiration of the premium assistance.
Employers and health plans may draft their own notices, but they may find it easier to customize the DOL model notices with their own plan information. If creating their own notices, ARPA requires they provide: (1) the forms necessary for establishing eligibility for premium assistance; (2) contact information for the plan administrator or other person maintaining relevant information in connection with the premium assistance; (3) a description of the additional election period (if applicable) to the individual; (4) a description of the requirement that AEI notify the plan when they become eligible for coverage under another group health plan or eligible for Medicare and the penalty for failing to do so; (5) a description of the right to receive the premium assistance and the conditions of entitlement; and (6) if offered by the employer, a description of the opportunity to enroll in a different coverage option available under the plan.
The time to send notice of the extended COBRA election period is defined by ARPA and explained in the DOL’s recently published guidance. Notice of this extended COBRA election period must be provided no later than May 31, 2021, and the individuals who receive this notice will have 60 days thereafter to elect COBRA and receive the subsidy.
Critically, as explained in our spring Employment Focus
newsletter, employers should review their employment records to identify those employees who lost health insurance coverage after Nov. 1, 2019, because their hours were reduced or because they were involuntarily separated from employment, thus ensuring they send the notice of this second change to elect COBRA continuation coverage by the May 31, 2021, deadline.
Should you have any questions concerning the use of these model notices, please do not hesitate to contact one of Chuhak & Tecson, P.C.’s
Employment practice attorneys.
Client Alert authored by Jeralyn H. Baran (312 855 4613), Principal and leader of Chuhak & Tecson’s Employment practice.
This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.
