On March 11, 2021, President Biden signed into law the far-reaching American Rescue Plan Act (ARPA, codified in HR 1319), a $1.9 trillion coronavirus relief bill. The legislation aims to address both the health and economic crises caused by the COVID-19 pandemic by allocating funds for vaccination programs, small business assistance, emergency rental assistance, and other initiatives. Significantly, between April 1 and September 30, 2021, the bill will offer free COBRA health insurance coverage to qualifying employees and their family members who lose their group health insurance coverage after an involuntary loss of work.

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Provisions and Effective Time Period

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The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a health insurance program that gives eligible employees the opportunity to choose to stay on their company-sponsored health plan for a limited time under certain circumstances, such as involuntary job loss or reduction in work hours, where they would otherwise lose their health coverage. Find more details about COBRA Continuation Health Coverage here.

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As employers often cover a portion of employees’ health insurance costs, COBRA continuation coverage is often more expensive than health coverage for active employees. However, COBRA coverage under the ARPA is free; during the six-month period between April 1 and September 30, 2021, the ARPA will allocate funds to cover 100% of COBRA insurance premiums for employees and their covered relatives who experienced a loss in coverage due to a COVID-19 related loss of work. A qualifying loss of work includes involuntary termination or a reduction in work hours. If a qualifying individual elects COBRA coverage under the ARPA, employers will be required to keep the individual and their family members on the group insurance plan and pay their premiums, and will be reimbursed by the federal government for those premiums.

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This free COBRA coverage will be effective during the six-month period between April 1 and September 30, 2021; the subsidy will last for up to six months, and will expire earlier if the qualifying individual’s maximum COBRA coverage period ends before September 30, 2021. COBRA coverage under the ARPA generally extends for 18 months from the date of the eligible employee’s termination of employment or reduction in employment hours.

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Employers may also offer qualifying employees up to 90 days after their receipt of a COBRA eligibility notice the option to elect enrollment in a different group health plan offered by the employer. The premium for this alternate coverage must not be higher than the premium for the preexisting health plan.

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Eligibility and Notification Requirements

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Importantly, under the ARPA, eligible individuals who did not elect COBRA coverage by April 1, or who discontinued their previously elected COBRA coverage, may elect COBRA coverage during an enrollment period beginning April 1 and expiring 60 days after their receipt of the COBRA eligibility notification. Individuals who are eligible for Medicare or other group health coverage are not eligible for the ARPA’s COBRA subsidy.

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The ARPA will require employers to notify eligible individuals of the COBRA subsidy within 60 days of April 1, 2021 by including separate documentation with or amending existing COBRA notice forms to include the following information:

• 1. The forms necessary for establishing eligibility for COBRA premium assistance;
• 2. The name, address, and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with premium assistance;
• 3. A description of the extended election period provided for by the ARPA;
• 4. A description of the qualified beneficiary’s notification requirements and the penalty provided under section 6720C of the Internal Revenue Code of 1986 for failure to carry out these requirements;
• 5. A description of the right to a subsidized premium and any conditions on entitlement to the subsidized premium; and
• 6. A description of the option to enroll in different coverage, if adopted by the employer.

Employers will also be required to notify individuals if their COBRA subsidy under the ARPA expires before September 30, 2021, except when their subsidy expires because they are eligible for other coverage.

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The U.S. Department of Labor will also be required to issue model COBRA subsidy notices within 30 days of the enactment of the bill.

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Resources for California Employers

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Employers should begin to compile a list of individuals that would be eligible for the ARPA’s COBRA subsidy, and keep on the lookout for further guidance from the federal government on updating COBRA notice forms and other subsidy-related issues.

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View the full text of the American Rescue Plan Act of 2021 (ARPA, HR 1319) here.

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View the U.S. Department of Labor’s informational website on COBRA continuation coverage here.

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If you have questions regarding the application of the ARPA’s COBRA subsidy to your business, please contact one of the following attorneys in The Maloney Firm’s Employment Law Department: Patrick Maloney, Lisa Von Eschen, Samantha Botros, or Nicholas Grether.

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