The American Rescue Plan Act of 2021 (“ARPA”) included – in addition to its stimulus package, expanded unemployment insurance benefits, and an extension of the FFCRA tax credits available to employers – an expansion of COBRA continuation benefits for individuals who are eligible as a result of reduced hours or involuntary termination.
The expansion applies to health insurance plans subject to federal COBRA and state mini-COBRA laws and includes a 100% premium subsidy for eligible individuals. Between April 1, 2021 and September 30, 2021, individuals who have elected COBRA coverage for medical, dental, or vision insurance will not be responsible for paying the associated premiums. This premium subsidy will be reimbursed to the employer or plan through payroll tax credits.
Under the ARPA, individuals eligible for continuation coverage who did not initially elect coverage, or who elected coverage but let the coverage lapse, may be eligible for an extended election period, as well as the premium subsidy for the period between April 1, 2021 and September 30, 2021. However, their period of eligibility must not have expired. As a reminder, generally, an individual is eligible for 18 months of COBRA continuation coverage beginning from the date of their reduction in hours or involuntary termination. In some situations, including disability or divorce, coverage may be extended to up to 36 months.
Employers are obligated to provide individuals with notice of the expansion, depending on the individual’s specific circumstances:
- Individuals who are separated from employment after April 1, 2021, but before September 30, 2021, should receive notice of the premium subsidy.
- Individuals who are eligible for continuation coverage and whose period of coverage has not lapsed should receive notice of the extended period of benefits and premium subsidy not later than May 31, 2021.
Employers will also need to provide individuals with notice that the premium subsidy is expiring no later than 15 days before the expiration.