COBRA Premium Assistance Program (ARPA)
President Biden signed into law the American Rescue Plan Act (ARPA) on March 11, 2021, providing monetary relief funded by a $2 trillion package for individuals and businesses impacted by the COVID-19 pandemic. This act has two main components that will affect employers and employees: Paid Leave and COBRA Premium Assistance. This article explains COBRA Premium Assistance. For more detailed information, please see the April 7, 2021 FAQ release by the Department of Labor.
COBRA Premium Assistance
What’s the Purpose
Generally, under Consolidated Omnibus Budget Reconciliation Act (COBRA), in order to elect continuation coverage, employees are responsible for bearing the cost of the extended insurance premiums which continue up to 18 months after each qualifying event. However, due to legislative and executive intent to relieve businesses and still provide health insurance, the passing of ARPA provides 100% subsidy to all private-sector employers or employee organizations (unions) subject to COBRA rules for up to six months of coverage for eligible employees for the period running from April 1, 2021 to September 30, 2021. If an individual is eligible as an Assistance Eligible Individual, the ARPA provides that the individual must be treated for purposes of COBRA, as having paid in full the amount of such premiums from April 1, 2021 through September 30, 2021. Employers may not collect premium payments from Assistance Eligible Individuals and subsequently require them to reimburse the covered period.
Assistance Eligible Individuals are the individuals who lost or whose family member lost group health plan insurance due to reduction of hours or an involuntary termination from employment. The loss of job does not need to be due to contracting COVID-19. Below is a list of qualifying events provided by the Department of Labor:
- Reduction of hours due to change in business hours,
- Change in status from full-time to part-time status,
- Taking temporary leave of absence,
- Individual’s participation in a lawful labor strike, as long as the individual remains an employee at time that hours are reduced,
- Involuntary termination (not including voluntary termination).
An individual experiencing the above events, so long as they elect continuation for coverage, can receive COBRA premium assistance. Because this program covers individuals ruled under COBRA, those who qualify for Medicare are not eligible. Please see the Summary provided by the Department of Labor.
Individuals may also be qualified if they did not elect COBRA continuation coverage when it was first offered prior to April 1, 2021 and to those who elected COBRA continuation coverage but is no longer enrolled (for example, dropping COBRA continuation coverage due to being unable to pay the premium). Individuals can begin their coverage prospectively from the date of their election, or if an individual has a qualifying event on or before April 1, 2021, choose to start their coverage as of April 1, 2021.
Duration of Coverage
The ARPA covers subsidizing employers through tax credits for paying 100% of COBRA premiums for their employees. Premium assistance under the ARPA lasts from April 1, 2021 to September 30, 2021. However, an individual will lose coverage once: (1) the employee becomes eligible for another group health plan under a new employer; or (2) the employee reaches the end of the max continuation coverage period, usually 18 months.
Employers must give formal notice to all eligible employees by May 31, 2021. Individuals then have 60 days after the notice to elect premium assistance. Model notices and forms can be accessed on the DOL website here. Employers may be subject to an excise tax under the Internal Revenue Code for failing to satisfy the COBRA continuation coverage requirements for as much as $100 per qualified beneficiary for each day that the taxpayer is in violation of the COBRA rules.
If you think you may be eligible for COBRA Premium Assistance, you can try to submit your Request Form yourself to your employer. Summary of COBRA Premium Assistance and Request Form. If you would like to seek the advice of an attorney regarding legal issues of employment, please contact Costanzo Law for a consultation.
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