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In the American Rescue Plan Act of 2021 (“ARPA”), Congress provided 6 months of free COBRA coverage to certain individuals eligible for COBRA continuation coverage due to an eligible event that is a reduction in hours or involuntary termination of employment. Employers must take swift action to comply with new notice and election requirements, as outlined in recent guidelines issued by the US Department of Labor (“DOL”).
Who is eligible:
Persons eligible for aid (“AEI”) are COBRA qualified beneficiaries:
a. whose COBRA qualification event was either a reduction in hours or an involuntary termination of employment;
b. who are not eligible for Medicare; and
vs. who are not eligible for coverage under another group health plan, including a new employer’s group health plan or employer group health plan of a spouse.
A former employee who voluntarily resigns, resigns or retires cannot be considered an IAE. As a result, neither they nor their covered family members are eligible for ARPA grants. Conversely, an employee who loses collective health coverage due to a reduction in hours – voluntary or not – can be an AEI, as can the members of his family covered. This includes an employee whose hours are reduced due to a change in the employer’s hours of operation, who moves from full-time to part-time status, takes temporary leave or participates to a legal strike, as long as there has been no termination of employment when the hours are reduced.
How does the grant work?
The DOL has posted an ARPA Grants Summary on its website that includes a form that COBRA-qualified grantees must complete and submit to request that they be considered an AEI. AEIs will not be required to pay COBRA premiums when ARPA grants are in effect. Instead, employers (or, in some cases, insurers) will obtain reimbursement of the subsidy through a credit against their Medicare FICA payroll taxes. If an AEI mistakenly pays premiums during the ARPA grant period, a refund must be issued within 60 days.
When is the ARPA grant effective?
Typically, grants will apply to an AEI’s COBRA coverage during the period April 1, 2021 to September 30, 2021. However, ARPA does not extend the period during which COBRA coverage is provided. For example, if a person’s 18 months of COBRA coverage is due to end on July 31, 2021, the person’s status as an AEI does not change the date the person’s COBRA coverage ends. Additionally, the ARPA grant does not apply for months in which an AEI is eligible for Medicare or coverage under an employer’s group health plan (with some exceptions). AEIs are required to notify the plan if they become eligible for other group health plan coverage or Medicare, and they face a financial penalty if they do not.
Action item: Group health plans must distribute a COBRA Notice that includes the ARPA provisions to any COBRA Qualified Beneficiary who experiences a COBRA Qualifying Event (not just a reduction in hours or involuntary termination) from April 1, 2021 until September 30, 2021.
What about people who could have been IAEs but refused or abandoned COBRA coverage?
These people have an additional option of opting for COBRA coverage. IAEs whose COBRA qualifying event was a reduction in hours or involuntary termination of employment before April 1, 2021, and who did not choose COBRA or who chose COBRA but are no longer enrolled in COBRA have a new 60-day election period to register COBRA and take advantage of the grant. By May 31, 2021, these individuals must be notified of their additional election period, which lasts 60 days after the notice is sent. Their COBRA coverage can be effective from April 1, 2021, or prospectively after choosing COBRA. It is important to note that the additional election period does not provide them with a longer period of COBRA coverage.
Action item: No later than May 31, 2021, group health insurance plans must distribute a notice of the additional election period to any AEI (or anyone who would be an AEI if COBRA coverage was in place) who has had an event. eligible before April 1, 2021.
What happens when the ARPA grant ends?
Group health insurance plans are required to notify AEIs when the ARPA grant will end and provide information on other coverages for which they might be eligible (albeit without the ARPA grant).
Action item: Group health plans must notify an AEI 15 to 45 days before the end of their subsidy. However, this is not required for people whose ARPA grant ends because they are enrolled in another group health plan or Medicare.
To note: The DOL has published Model Reviews, which can be viewed on their website.
Click here to view the notices in Word or pdf format.
Do ARPA rules apply to small employers or government entities?
ARPA grants are available to AEIs who were enrolled in schemes sponsored by small employers who are required to comply with state mini-COBRA rules or to state or local or government entities subject to the COBRA rules of the Act. public health services. In fact, the DOL has published an alternative model notice that can be used by such plans. However, ARPA does not change any of the program requirements that apply.
If you are sponsoring group health coverage that is subject to federal COBRA or state mini-COBRA requirements, it is important that you contact your plan’s service providers (e.g., insurer, third-party administrator, and / or COBRA administrator) to ensure that your plan will comply with these new rules in a timely manner. COBRA failures can result in potentially significant exposure to excise taxes under Section 4980B of the federal tax code, and the DOL notice indicates that ARPA’s failures – including failure to comply with new notification requirements – will trigger such exposure.
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