One of the Biden administration’s most high-profile health plan policy initiatives from its first 100 days is a temporary subsidy for health plan continuation coverage premiums under COBRA. The COBRA premium assistance rules, which the Biden administration proposed just prior to taking office, were enacted in March 2021 as part of the $1.9 trillion COVID-19 stimulus legislation — the American Rescue Plan Act of 2021 (ARPA-21).
In some ways, the ARPA-21/COBRA premium assistance requirements are similar to premium subsidy requirements enacted in 2009 in response to the Great Recession (though the 2009 law did not provide a 100% premium subsidy).
Under ARPA-21, individuals who become eligible for and elect COBRA coverage because of their own or a family member’s reduction in hours or involuntary termination of employment between April 1, 2021, and September 30, 2021, are not required to pay any COBRA premiums to their employer’s health plan for coverage during that six-month period. The ARPA-21/COBRA premium subsidies are paid by the employer (or in some cases by the health plan or insurer) and then reimbursed by the federal government through a tax credit.
To hear the latest on COBRA and other current topics of interest, attend our webcast.
What are the Biden administration’s new COBRA rules?
The new COBRA rules apply to health plans sponsored by private-sector employers and unions that are subject to COBRA, and to similar state-law continuation coverage (known as mini-COBRAs).
To be eligible for ARPA-21/COBRA premium assistance, an individual (referred to as an “assistance eligible individual” (AEI)) must:
- Otherwise lose group health plan coverage because of a COBRA qualifying event that is an involuntary termination of employment (but not for gross misconduct) or reduction in hours. Premium assistance under ARPA-21 is not available for employees who voluntarily terminate the employment relationship
- Not be eligible for Medicare or other group health plan coverage
- Actually elect COBRA coverage
The ARPA-21 subsidy also is available to individuals who experienced certain COBRA qualifying events (a reduction in hours or involuntary termination) before April 1, 2021, but who have not yet reached their maximum COBRA coverage period or did not elect COBRA when it was first offered. These individuals must be:
- Provided notice of the additional opportunity to elect COBRA by May 31, 2021
- Allowed 60 days after the notice is provided to elect COBRA
However, ARPA-21 does not extend the maximum COBRA coverage period.
What do plan administrators need to know about ARPA-21?
Plan administrators must provide timely notice informing individuals of their rights under ARPA-21, which includes notice that an individual’s premium assistance period will expire. The DOL has provided initial guidance regarding the ARPA-21/COBRA premium assistance rules, along with model notices for use during the temporary premium assistance period. The U.S. Department of Health and Human Services has also addressed the COBRA premium subsidies in implementing guidance. Additional guidance is expected in the near future from the IRS, which should address open questions concerning the premium subsidies and related COBRA requirements.
What else do I need to know about Biden’s first 100 days?
To learn more about the changes to COBRA, and other important matters, watch our webcast, A conversation with Practical Law attorney-editors on some of the impact of Biden’s First 100 Days.