American Rescue Plan Act: New COBRA Premium Subsidy

The BenefitWorks wants to help you navigate the new COBRA Premium Subsidy that came out of the American Rescue Plan Act:

Employers that laid off or reduced hours for any employees between October 1, 2019 – September 30, 2021 will most likely have obligations under the American Rescue Plan Act COBRA Premium Subsidy. This applies whether your company is subject to the federal COBRA law (20+ employees) or follows the state continuation laws (less than 20 employees).

The act provides a 100% subsidy of COBRA premiums for eligible individuals who lost group health coverage due to a reduction in hours or involuntary termination of employment. The subsidy is available for COBRA premiums between April 1, 2021 and Sept. 30, 2021. Any former employee that lost health coverage for one of the reasons above and would be in their 18-month COBRA eligibility period at any point between April 1, 2021 and September 30, 2021 might be able to take advantage of the premium subsidy. Even an employee who did not elect COBRA continuation coverage when it was first offered, or who elected COBRA continuation coverage but is no longer enrolled (i.e. they stopped paying premiums). These folks may have an additional election opportunity if they too could take advantage of the premium subsidy between April 1, 2021 and September 30, 2021. Note that premium assistance is not available to individuals eligible for other group health coverage or Medicare.

Employers must send a notice about this extended COBRA election period by May 31, 2021 to those that are eligible. Those individuals then have 60 days after the notice is provided to elect COBRA or state continuation. Note that this additional election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months). In this situation, individuals can begin their COBRA coverage from the date of their election, or, if an individual has a qualifying event on or before April 1, choose to start their coverage as of April 1. In either case, the premium assistance is only available for periods of COBRA coverage from April 1, 2021, through Sept. 30, 2021.