On March 11, 2021, the American Rescue Plan Act of 2021 (ARP) became law in the United States. Provisions of this law state that employers are now required to pay a 100% subsidy of the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage premiums for certain people during the period of April 1, 2021, through September 30, 2021. Employers are to receive a reimbursement from the federal government via a tax credit. This article will provide employers with a summary of the COBRA subsidy rule that is contained within ARP and some tips on complying therewith.
While this article is exclusively focused on group healthcare plans governed by the provisions of federal COBRA, it is worthy to note that ARP also provides similar premium assistance for individuals with group healthcare plans covered by certain state, local, and mini-COBRA laws. (I address them no further, although there may be differences in access or other aspects.)
Who Qualifies Under ARP to Have Their COBRA Continuation Coverage Premiums Paid?
As the U.S. Department of Labor (DOL) so thoughtfully informs us, those who are entitled to get their COBRA continuation coverage premiums paid:
- “MUST have a COBRA qualifying event that is a reduction in hours or an involuntary termination of a covered employee’s employment;
- MUST elect COBRA continuation coverage;
- MUST NOT be eligible for Medicare; AND
- MUST NOT be eligible for coverage under any other group health plan, such as a plan sponsored by a new employer or a spouse’s employer.”
As in the case of many governmental rules and regulations, there may actually be more to the requirements and specifications than listed above or elsewhere in this post. But suffice it to say that the foregoing is a fundamental summary.
I will note, however, that I did see more details relative to having, or not having, access to other group health coverage and what may or may not be considered as barring access to this ARP premium assistance. As I read the materials, being eligible for other group health plans would not include those plans containing only excepted benefits (such as vision or dental). However, it appeared that being eligible for a qualified small employer health reimbursement arrangement or a health flexible spending arrangement would be problematic when seeking to secure eligibility for this ARP premium assistance. So, be certain to explore additional information, as this post is simply a summary, not a complete discussion, of the ARP premium assistance program.
Some Examples of People Who May Be Eligible to Have Their COBRA Continuation Coverage Premiums Paid Under ARP
A. An employee becomes eligible for COBRA during the period of April 1, 2021, through September 30, 2021.
By way of example, if an employee suffers a specified COBRA-qualifying event (is involuntarily terminated (i.e., laid off) or suffers the necessary reduction in hours) in April 2021 and timely elects to continue his or her covered group healthcare plan under COBRA, then the person is eligible to have his or her COBRA continuation coverage premiums paid during the period specified by ARP.
This example presumes that (i) the employee is not eligible for Medicare; (ii) he or she is not disqualified from being eligible for any other group health plan; and (iii) his or her separation was not for gross misconduct.
Note: If someone with COBRA rights suffers a specified COBRA-qualifying event (is involuntarily terminated (i.e., laid off) or suffers the necessary reduction in hours) on September 30, 2021, then the employee might not benefit (even though laid off during the specified period) because the assistance program currently expires as of September 30, 2021. Thus, there are still many details to be worked out as the plan is further explained and implemented.
B. An employee lost coverage before April 1, 2021, and is on COBRA as of April 1, 2021.
If an employee suffers a specified COBRA-qualifying event (is involuntarily terminated (i.e., laid off) or suffers the necessary reduction in hours) before April 1, 2021; timely elects to continue his or her covered group healthcare plan under COBRA; and is on COBRA as of April 1, 2021, then he or she appears to be eligible to have his or her COBRA premiums paid during the period specified by ARP.
This example presumes that (i) the employee is not eligible for Medicare; (ii) he or she is not disqualified from being eligible for any other group health plan; and (iii) his or her separation was not for gross misconduct.
Note: The ARP COBRA premium assistance coverage does not extend the length of the COBRA coverage available to an employee. As a result, if COBRA expired on July 30, 2021, for the employee in this example, then this person would not be eligible to have any premiums paid after that date. Likewise, if his or her COBRA coverage would expire after September 30, 2021, then the employee should be able to have his or her premiums paid during the time of April 1, 2021, through September 30, 2021.
C. An employee became eligible for COBRA coverage before April 1, 2021, but did not initially elect COBRA coverage.
If an employee suffers a specified COBRA-qualifying event (is involuntarily terminated (i.e., laid off) or suffers the necessary reduction in hours) before April 1, 2021, but did not initially elect to continue his or her covered group healthcare plan under COBRA and is not on COBRA as of April 1, 2021, then the employee may still be eligible to have his or her COBRA premiums paid during the period specified by ARP, provided his or her COBRA-eligible period has not expired.
By way of example, and under the above example, if the employee’s COBRA coverage period were to expire on July 31, 2021 (if it had been elected when first available), then the employee may be afforded another opportunity to elect COBRA and then have his or her COBRA premiums paid from April 1, 2021, through that expiration date of July 31, 2021. Remember, ARP does not extend the length of COBRA coverage. Rather, it only provides for payment assistance.
D. An employee becomes eligible for COBRA coverage before April 1, 2021, and actually elects COBRA but then lets the COBRA coverage lapse, such as by not paying the premiums.
If an employee suffers a specified COBRA-qualifying event (is involuntarily terminated (i.e., laid off) or suffers the necessary reduction in hours) before April 1, 2021, and actually elects COBRA coverage but then lets the COBRA coverage lapse, such as by not paying the premiums, and is not on COBRA as of April 1, 2021, then the employee may still be eligible to have his or her COBRA premiums paid during the period specified by ARP if his or her COBRA-eligible period has not expired.
By way of example, and under the above example, if the employee’s COBRA coverage were to expire on July 31, 2021 (if it had not been permitted to lapse earlier), then the employee may be afforded an opportunity to again elect COBRA and then have his or her COBRA premiums paid from April 1, 2021, through July 31, 2021. Likewise, if the employee’s COBRA coverage would expire subsequent to September 30, 2021, then he or she may be entitled to have his or her premiums paid from April 1, 2021, through September 30, 2021. Remember, ARP does not extend the length of COBRA coverage. Rather, it only provides for payment assistance.
Some Examples of People Who May Not Be Eligible to Have Their COBRA Premiums Paid Under ARP
Before I provide some fundamental examples demonstrating who may not be able to participate in the COBRA premium payment benefit, I first need to remind the reader that this post is a general summary only. Particular cases would need particular consideration. Thus, before a determination can be made as to whether a particular person is or is not qualified for the ARP payment benefit, there would need to be specific research conducted based on that person’s particular facts. These examples are nothing more than examples that do not factor any particular individual’s facts into consideration. With that having been said:
A. An employee became eligible for COBRA coverage before April 1, 2021, and did elect COBRA coverage, but his or her COBRA coverage period then expired before April 1, 2021.
If an employee suffers a specified COBRA-qualifying event (is involuntarily terminated (i.e., laid off) or suffers the necessary reduction in hours) before April 1, 2021, and actually elects COBRA coverage but his or her COBRA coverage is then fully exhausted and expires before April 1, 2021, then he or she may not be eligible to have premiums paid under ARP. Remember, ARP does not extend the length of available COBRA coverage.
The foregoing does not necessarily mean that the referenced employee may not have access to some other assistance, such as some other federal or state program. Rather, it simply means that the referenced ARP assistance may not be available.
B. An employee voluntarily quits employment either before April 1, 2021, or during the period of April 1, 2021, through September 30, 2021.
The provisions of ARP that are the subject of this post do not provide for paying COBRA premiums for employees who voluntarily quit their jobs. So, in this example, the employee who voluntarily quit his or her job may not have direct access to this ARP benefit. This does not, however, mean the employee may not have access through someone else, such as his or her spouse, who may independently quality for this benefit. Again, this post is only a general summary, and further research would be necessary based on an individual’s specific facts.
C. An employee was involuntarily terminated for gross misconduct.
The provisions of ARP that are the subject of this post do not pay COBRA premiums for employees who were involuntarily terminated for gross misconduct. So, in this example, the employee who was involuntarily terminated due to gross misconduct may not have direct access to this ARP benefit.
But again, further research would be necessary regarding what qualifies as “gross misconduct.” Then, there is also the question of whether the person’s former employer would actually seek to prevent the former employee’s access. After all, the premiums are ultimately paid by the federal government, as will be explained below. So, the former employer may simply decide not to create an issue. But then, on the other hand …
D. An employee was involuntarily terminated for a reason other than gross misconduct but is eligible for Medicare.
The provisions of ARP that are the subject of this post do not pay COBRA premiums for people who are eligible for Medicare. So, in this example, the employee who was involuntarily terminated may not have direct access to this ARP benefit because he or she was eligible for Medicare.
E. An employee was involuntarily terminated for a reason other than gross misconduct but has access to a group healthcare plan through his or her spouse’s employer or a plan sponsored by his or her new employer.
The provisions of ARP that are the subject of this post do not pay COBRA premiums for employees who are eligible for a group healthcare plan through their spouse’s employer or a plan sponsored by their new employer. So, in this example, the employee who was involuntarily terminated but was eligible for another group healthcare plan, as indicated above, may not have direct access to this ARP benefit. Of course, the person concerned about this issue would need to further investigate based on his or her specific facts, as there are more factors, requirements, and technical issues to be considered.
How Does All This Work?
If you know how all this works, then you are likely already far ahead of many employers and plan sponsors that are charged with complying with ARP.
In a nutshell, the employers and/or the plan sponsors are required to notify people (who are referred to as assistance-eligible individuals) that they are eligible for this benefit. That notice is required to be given within 60 days of when they become eligible. So, for those who became eligible as of April 1, 2021 (when the law came into being), they are to be provided written notice of their eligibility not later than May 31, 2021. The assistance-eligible individuals are to be provided with a document to complete and return (“Request for Treatment as an Assistance Eligible Individual Form”) wherein they request to receive this benefit. These materials and documents must be returned within a specified deadline. If the materials are not completed and returned within the specified deadline, then the assistance-eligible individuals may lose their right to the premium assistance.
Functionally, the employer/plan sponsor is not to collect COBRA premiums from the assistance-eligible individuals. Instead, the employer/plan sponsor is to make the COBRA payment and then obtain a reimbursement pursuant to what is referred to as a “COBRA premium assistance credit.” Obviously, because this program is brand new, some assistance-eligible individuals will initially make the premium payments until after they have received and submitted the materials/documents/notices. If, however, the assistance-eligible individuals have paid a covered COBRA premium that was to have been paid on their behalf, then they will need to be promptly reimbursed these funds. Alternatively, they may agree to a credit toward a future COBRA premium that would be due after September 30, 2021. In other words, take steps to work the issue out with those who made the payment.
If someone has not received a notice from his or her employer/plan sponsor and believes he or she is an assistance-eligible individual, then he or she can notify his or her employer/plan sponsor of this information and that he or she wants to be treated as an assistance-eligible individual for the coverage period starting April 1, 2021 (or whatever period is applicable). If this happens, it would be prudent to immediately open a dialogue with the employee and ensure he or she completes the proper forms for the benefit. Do not let the person lose his or her entitlement to this benefit due to an employer mistake. Given the value of this benefit and penalties involved, it behooves everyone not to let it slip away.
What If an Employer/Plan Sponsor Fails to Lawfully Comply with the COBRA Continuation Coverage Requirements?
If a person believes that an employer/plan sponsor is failing to lawfully comply with the COBRA continuation coverage/premium assistance/legal requirements, then he or she can seek assistance from the Employee Benefits Security Administration (EBSA), an agency within the DOL. The individual can do this by calling the EBSA at 866-444-3272 and speaking with one of the representatives who answers the call. The person can also reach out to the DOL by visiting https://www.dol.gov/cobra-subsidy. Of course, he or she can also contact an attorney of his or her own choosing. Those are just a few of the options.
Employers and their plans may even be subjected to an excise tax of $100 per day per qualified beneficiary or up to $200 per family per day should they violate COBRA rules. So, the consequences can be stiff. Of course, plan beneficiaries can also be fined for failing to notify their employers/plan sponsors once an employee is no longer eligible for premium assistance, such as because the person became eligible for Medicare or because he or she became eligible for other group health plan coverage, etc.
Will the DOL Help Me Figure All This Out?
Yes, if you would like to further explore your duties and responsibilities under the ARP COBRA continuation coverage premium assistance benefit, the DOL is here to help. You can obtain its assistance by:
Visiting: https://www.dol.gov/cobra-subsidy
Accessing: https://www.askebsa.dol.gov
Calling: 1-866-444-3272
I called the 866-444-3272 phone number and found the representatives to be polite, patient, friendly, informative, knowledgeable, and helpful. They can answer all of your questions.
In addition to the foregoing, here are some essential links:
- FAQs on COBRA Continuation Health Coverage for Employers and Advisers
- FAQS ABOUT COBRA PREMIUM ASSISTANCE UNDER THE AMERICAN RESCUE PLAN ACT OF 2021
- Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021
- Cobra Premium Subsidy Under The American Rescue Plan Act of 2021
- Fact Sheet: The American Rescue Plan Act of 2021
It is recommended that you directly contact the above links, especially the 866-444-3272 telephone number, if you have any doubts, questions, or concerns. The representatives are more than able to walk you through the requirements of ARP and just who may be entitled to receive this benefit.
Of course, it is also strongly recommended that you seek qualified legal counsel if you need help determining your duties and responsibilities under ARP.
Francis Drelling has a private practice in Orange County California where he advises employers and businesses on employment and business matters. Previously he served as general counsel for a nationwide hospitality company. He can be reached via LinkedIn or fdrelling555@gmail.com.