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6 Months Free COBRA Insurance Coverage for Eligible Individuals – Retroactive 18 Months. New Rules for Employer Compliance

by | Apr 29, 2021 | Firm News

President Biden signed into law March 11 the $1.9 trillion American Rescue Plan Act of 2021 (ARPA).  Among the benefits is 6 months of free (federally subsidized) continued health insurance coverage beginning this month.  This significant benefit is for individuals who “had a COVID qualifying event that is a reduction in hours or an involuntary termination.” This is provided through what is known as the COBRA program (“Consolidated Omnibus Budget Reconciliation Act” to help eligible employees and their beneficiaries.

ARPA makes 100% premium assistance available during the period April 1, 2021 through September 30, 2021.

Access to these free COBRA benefits is limited to “Assistance Eligible Individuals” (AEI) who meet certain requirements. An AEI is defined as someone who experienced an involuntary termination of employment (not caused by gross misconduct) or had a voluntary or involuntary reduction in hours worked and either refused or elected COBRA continuation health insurance coverage before April 1, 2021.

Eligibility for other group health plans (new employer plan, a spousal plan, a Flexible Spending Account (FSA), a QSEHRA) or Medicare, disqualifies the AEI for this COBRA premium assistance.

An AEI who has already paid COBRA premiums after April 1, 2021, should contact the plan administrator or employer sponsoring the plan to discuss a credit against future payments (or a refund in certain circumstances).

The most significant inclusion in ARPA is the compliance requirements for all employers, insurance companies and Third-Party Administrators (TPA) in addition to the rights and responsibilities of the AEI.  There are multiple notices required by the Dept of Labor (DOL) that must be sent to all AEI advising them of their rights and responsibilities.  The first and most critical ARPA notice requires the employer to contact any employee or beneficiary who qualifies as an AEI since November 1, 2019 advising of their rights and responsibilities under ARPA.

This Notice must be provided by May 31, 2021.  See further resources below to download the DOL Model ARPA General Notice and COBRA Continuation Coverage Election Notices. Employers or companies not in compliance with the notice requirements face $100 per notice per AEI per day fines by the DOL.

An oversight in ARPA, which as of this writing has not been clarified by the DOL is the lack of recognition of the unfunded government mandate, i.e., who bears the cost of the foregone premiums.  ARPA provides that the AEI “shall be treated for purposes of any COBRA continuation provision as having paid in full the amount of such premium.”  ARPA § 9501(a)(1)(A). That affirms that both insurers and employers are to treat the premium as having been paid and the employee is assured of continuing health insurance..

Neither self-insured employers nor insurance companies will receive premium payments during the period of the COBRA subsidy. Under ARPA, the federal government gives insurance companies and self-insured employers a quarterly tax credit against the Medicare portion of the FICA tax (1.45%) equal to the premium not paid by the AEI. The credits are to be given to “person for whom premiums are payable.” See ARPA § 9501(b)(1)(A), creating new Internal Revenue Code § 6432(a) and (b)

There are other details in the ARPA statute that include the option of changing to an alternate COBRA coverage, Health Insurance Marketplace enrollment options and requirements, as well as penalty details.  See ARPA 9501.  Employers need to check the DOL website for new updates and guidelines.

Key next steps:

  • As an employer, make sure that your TPA has provided you a list of all potential AEI’s in your insured community since November 1, 2019
  • If your plan is self-insured and does not have a TPA, have your HRD or legal counsel prepare the potential AEI list.
  • Complete and deliver before the end of May, the ARPA “Look-Back” Notices beginning with the General Notice and COBRA Continuation Coverage Election
  • Stay on top of the 7 critical ARPA dates between now and Sept 30:
    • May 16: Expiration of Premium Assistance Period Notice due for May expirations.
    • May 31: Plan Sponsors deadline to furnish ARPA Notices.
    • June 15: Expiration of Premium Assistance Period Notice due for June expirations.
    • July 16: Expiration of Premium Assistance Period Notice due for July expirations.
    • Aug 16: Expiration of Premium Assistance Period Notice due for Aug. expirations.
    • Sept 15: Expiration of Premium Assistance Period Notice due for Sept. expirations.
    • Sept 30: Period of Premium Assistance ends for all AEIs

Further Resources

Jeff LeSourd, COO, Incenta LLC, which is the health technology firm started by Dennis Kelly the Insurance Subject Matter Expert for Gammon & Grange.  Jeff is also the Insurance Consultant for Gammon & Grange Consulting, LLC.


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