The American Rescue Plan Act, Part 1 - COBRA Premium Assistance

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (Act). The Act is a $1.9 trillion legislative package that includes pandemic relief for individuals and families. The Act contains several provisions including funding to the Centers for Disease Control and Prevention, stimulus checks, unemployment benefits, the child tax credit, tax credits for paid sick leave and family and medical leave, the Paycheck Protection Program, grants to state educational agencies, and low-income family assistance. The Act also contains several provisions affecting group health plans. This series of Advisors will focus on the provisions affecting group health plans. Below is an overview of the Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage premium assistance provisions contained in the Act.

The Act provides COBRA relief for assistance-eligible individuals. An assistance-eligible individual is an individual who is eligible for COBRA due to the COBRA qualifying event of termination of employment or reduction in hours, except for an individual’s voluntary termination of employment, and if he or she elects coverage during the period beginning April 1, 2021, and ending on September 30, 2021.

COBRA Premium Assistance

COBRA premiums for any period of coverage for an assistance-eligible individual covered under COBRA in the period of time beginning April 1, 2021, and ending on September 30, 2021, will be considered paid (that is, assistance-eligible individuals will not be required to pay the COBRA premiums). If an assistance-eligible individual pays any portion of the COBRA premiums, the amount must be reimbursed within 60 days of the date on which the individual made the premium payment.

Permitted Alternative (Different) COBRA Coverage

If an assistance-eligible individual enrolled in a group health plan experiences the COBRA qualifying event of termination of employment or reduction in hours, other than voluntary employment termination, an employer may choose to offer the COBRA-qualified individual different coverage (in addition to the offer of normal COBRA coverage) that is not the same plan as the plan the individual was covered under at the time the COBRA qualifying event. The individual must elect this coverage no later than 90 days after receiving notice of the option. The premium for this different coverage must not exceed the premium for coverage in which the individual was enrolled in at the time the qualifying event occurred. The different coverage in which the individual elects to enroll in must be coverage that is also offered to similarly situated active employees of the employer at the time the individual elects the different coverage. The different coverage cannot be a) coverage that only provides excepted benefits, b) a qualified small employer health reimbursement arrangement (QSEHRA), or c) a flexible spending arrangement (FSA). This coverage will be treated as COBRA coverage.

Extension of COBRA Election Period

An individual who a) does not have a COBRA election in effect on April 1, 2021, but who would otherwise be an assistance-eligible individual if an election were in effect; or b) elected COBRA continuation coverage, but discontinued the coverage before April 1, 2021, may elect COBRA continuation coverage during the period beginning April 1, 2021, and ending 60 days after the date on which the administrator of the applicable group health plan (or other entity) provides the additional notification, described below, to the individual.

Any COBRA continuation coverage elected by a qualified beneficiary during an extended election period noted above must begin on or after April 1, 2021, and will not extend beyond the maximum period of COBRA coverage that would have applied had the coverage had been elected and maintained without the extension.

Limitation of the COBRA Premium Subsidy

This COBRA premium subsidy will expire upon the earlier of:

• The first date that the individual is eligible for benefits under Medicare or eligible for coverage under any other group health plan (not including coverage that a) only provides excepted benefits, b) is a QSEHRA, or c) is an FSA); or
• The earlier of:
  • The date following the expiration of the applicable maximum COBRA coverage period due to the qualifying event, or
  • The end of the COBRA period that would have applied had the coverage had been elected and maintained without the extension.

An assistance-eligible individual must notify the group health plan when his or her premium subsidy period has expired as noted above. The Act provides that the Department of Labor (DOL) will determine the way the notice must be provided and the deadline by which the notice must be provided.

Continue Reading to learn more about:

• Notices to Individuals
• Premium Assistance Credit