Benefits and Compensation, HR Management & Compliance

American Rescue Plan Offers Free COBRA Coverage, But it’s Very Complicated

When President Joe Biden signed the American Rescue Plan Act of 2021 (ARPA), one of the effects was to make COBRA continuation coverage free for certain qualifying individuals and their families from April 1 to September 30, 2021. The free coverage is available to those who lose group health plan coverage because either (1) they were terminated (not including resignations) or (2) their hours were reduced. So, all you have to do is remember the two reasons and the new coverage until September 30, right? No, it’s not that easy.

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The free coverage is also available to “expired COBRA participants,” i.e., those who (1) already lost coverage because of one of the two reasons and (2) could have had COBRA coverage during the period from April 1 to September 30, 2021. They would include people who either:

  • Failed to elect COBRA coverage during their normal 60-day (but now-expired) election period; or
  • Elected COBRA coverage but discontinued it before April 1, 2021.

Expired COBRA participants would likely include individuals going all the way back to November 2019.

New Election Period and Notice Requirement

Expired COBRA participants have a new 60-day election period beginning April 1, 2021, to choose COBRA coverage. The new period, however, doesn’t extend their normal COBRA period. For example, if they were entitled to 18 months of COBRA because of a termination that occurred in November 2019, their coverage would still expire in April 2021.

Employers are required to notify the individuals described above (including expired COBRA participants) of the new free coverage and its availability. The ARPA requires the federal government to issue a model notice for the purpose by April 10, 2021.

Bottom Line

Employers and plan sponsors should get with your COBRA administrators immediately to make sure they’re on top of the new rules. You’ll want to identify the individuals who could have been entitled to COBRA (because of job loss or reduction in hours) during the period from April 1, 2021, to September 30, 2021 (including the expired COBRA participants) because you’re going to have to give them a new notice and a new election period.

Given the guidance (U.S. Department of Labor Notice 2021-01) we received a few weeks ago, which basically gives every COBRA-qualifying individual their own one-year extended period to elect coverage, COBRA is now free and very complicated.

Brandon Long is an ERISA attorney in the Oklahoma City, Oklahoma, office of McAfee & Taft. You can reach him at

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