This article will focus on the changes the American Rescue Plan Act (ARPA) of 2021 has ushered in for employers and for those who qualify for continuation of health coverage under COBRA.
COBRA, short for the Consolidated Omnibus Budget Reconciliation Act, permits employees to keep health coverage under their employer’s health plan for eighteen months following voluntary or involuntary job loss or a reduction in job hours. While the current changes under ARPA are only temporary, it is important to be aware of the changes.
Subsidy
Beginning April 1, 2021, employees who lose their jobs or receive a reduction in their work hours that is not voluntary will receive a subsidy of 100%. Employees in such circumstances are eligible for subsidies until September 30, 2021. After September 30, 2021, employees and their dependents will still be eligible for COBRA but will have to financially contribute in order to receive the health coverage under their former employer’s plan. Those who are currently receiving COBRA coverage are also eligible for subsidy receipt, although it is important to note that the eighteen-month period will not be extended.
To account for these individuals eligible for subsidies, employers will be reimbursed via receipt of Medicare tax credits.
Change in Eligibility for Subsidy
If the individual becomes eligible for health benefits under another health plan or under Medicare, they cannot receive a subsidy. The individual must inform their former employer if these circumstances change and they are ineligible to continue receiving the subsidy. There is a financial penalty for individuals who do not update their former employers.
Notice Requirements
Eligible individuals who lost their job or have lost work hours before April 1, 2021 must receive additional information from their former employer by May 31, 2021 regarding COBRA coverage. The additional information includes, but is not limited to, COBRA eligibility forms, health plan administrator contact information, extended election period information, and information regarding permissive enrollment in an alternative coverage plan. Those who become eligible for COBRA coverage after April 1, 2021 must also receive notification from their former employer regarding the additional information.
Employers are required to notify the individuals receiving subsidies that their subsidies are expiring between 45 and 15 days before the expiration. The notice must indicate that individuals are still eligible for unsubsidized COBRA coverage.
The U.S. Department of Labor plans to publish a sample coverage expiration notice by the end of April 2021. If you have questions regarding how these temporary changes to COBRA coverage impacts your business operations, please reach out.