Insight

Availability of Health Insurance Subsidy Requires Employers to Act

Availability of Health Insurance Subsidy Requires Employers to Act

Melissa H. Weaver

Melissa H. Weaver

April 16, 2021 11:31 AM

On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA” or the “Act”), another piece of the federal government’s response to the COVID-19 pandemic. Among other things, the Act provides premium assistance for eligible employees and their family members who elect continuation coverage under COBRA or a state’s mini-COBRA law and continue health insurance benefits under those laws. The premium assistance is available for coverage between April 1, 2021 and Sept. 30, 2021. Employees pay nothing for their coverage during this time, and employers are reimbursed for the amount of premium assistance provided through a credit against their payroll taxes. In order to be eligible for the subsidy, an employee and their dependents must become eligible for continuation coverage due to the employee’s involuntary termination of employment or a reduction in hours that results in a loss of coverage under the employer’s group health insurance plan. Notably, there is no requirement that the termination or loss of coverage be related to COVID-19.

On April 7, 2021, the Department of Labor released FAQs about the COBRA premium assistance benefit, as well as several model notices that can be used by employers to meet the Act’s notice requirements.

Key Points for Employers:

  • Notice to employees is required: Notice is required for those who qualify between April 1, 2021 and Sept. 30, 2021, and also for those who had a COBRA-qualifying event before April 1, 2021. Model notices and FAQs from the Department of Labor are linked here. Currently eligible individuals are to be provided notice on or before May 31, 2021.
  • Eligibility for COBRA subsidy is broad, but has limits: Those who meet the following are eligible for the subsidy:
    • Are otherwise eligible for COBRA continuation coverage due to an employee’s reduction in hours for any reason or are eligible for COBRA continuation coverage due to an employee’s involuntary termination of employment (not including a termination for gross misconduct such that COBRA coverage would not be available); and
    • Elect COBRA continuation coverage within 60 days of receiving the election notice.

The premium assistance is not available where an employee’s termination of employment is voluntary or due to the employee’s death or where a dependent ages out of eligibility for the health plan. In addition, employees who are eligible for other group health coverage are not eligible for premium assistance benefits. However, those who have individual policies, such as through the Health Insurance Marketplace, may be able to elect COBRA and move back to the employer’s plan instead, although doing so will make them no longer eligible for a premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit for health coverage during that period.

  • Duration of assistance is limited: The subsidy ends Sept. 30, 2021 or earlier if the covered individual is eligible for other coverage. Individuals are required to notify the plan administrator of their eligibility for other coverage or face a penalty of $250 (more if failure to notify is fraudulent).
  • There’s an option to allow switch to new health plans: Employers may, but are not required to, allow individuals eligible for premium assistance to switch to a new medical plan option with a cost no more than their current option. Essentially, this allows individuals eligible for premium assistance to have a new open enrollment period, if the employer wants to provide it. However, it does not allow individuals to “buy up” to a more expensive plan option than they had at the time of their qualifying event and get it for free. If offered, the Act requires the employer to provide eligible individuals with notice of this option, and gives them 90 days to elect to change medical options following receipt of the notice.
  • “Do Over” available for employees who previously rejected or dropped COBRA coverage: A qualified beneficiary who was eligible to elect COBRA due to an employee’s reduction in hours or involuntary termination of employment prior to April 1, 2021, but who did not do so, or who elected COBRA continuation coverage but dropped it, may have an additional election opportunity under the Act. However, this additional election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months from the employee's reduction in hours or involuntary termination). This new period of continuation coverage can begin no earlier than April 1, 2021 (a retroactive election is permitted), or individuals can begin their coverage prospectively from the date of their election. In either case, the premium assistance is only available for periods of coverage from April 1, 2021 through Sept. 30, 2021. If coverage extends beyond Sept. 30, 2021, it will be at the qualified beneficiary’s expense.
  • Subsidy is available for state continuation coverage: Premium assistance is generally available for continuation coverage through state continuation coverage (mini-COBRA) laws.

Reach out to the Brooks Pierce Labor and Employment team, linked below, with any questions and especially if you need help figuring out:

  • What notices and communications you need to provide;
  • Which individuals are eligible and need to receive notices;
  • Whether to allow the option to switch plans;
  • What updates are needed to your COBRA election forms; or
  • How to comply under state continuation without a COBRA vendor to help.

Related Articles

DOL Proposes New Overtime Rule and Salary Threshold for Exemption


by Megan Erickson Moritz

The Department of Labor is proposing a hike to the salary threshold requirement for exempted employees.

DOL Salary Exemption New Rule

Trending Articles

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Could Reign Supreme End with the Queen?


by Sara Collin

Canada is revisiting the notion of abolishing the monarchy after Queen Elizabeth II’s passing, but many Canadians and lawmakers are questioning if Canada could, should and would follow through.

Teacup on saucer over image of Queen's eye

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

The Best Lawyers in South Africa™ 2023


by Best Lawyers

Best Lawyers proudly announces lawyers recognized in South Africa for 2023.

South African flag

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?

Announcing the 2023 The Best Lawyers in Canada Honorees


by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

Caffeine Overload and DUI Tests


by Daniel Taylor

While it might come as a surprise, the over-consumption of caffeine could trigger a false positive on a breathalyzer test.

Can Caffeine Cause You to Fail DUI Test?

Thirteen Years of Excellence


by Best Lawyers

For the 13th consecutive year, “Best Law Firms” has awarded the most elite and talented law firms across the country through a thorough and trusted data review process.

Red, white and blue pipes and writing on black background

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

IN PARTNERSHIP

2022: Another Banner Year


by John Fields

Block O’Toole & Murphy continues to secure some of New York’s highest results for personal injury matters.

Three men in business suits standing in office

Announcing The Best Lawyers in Australia™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Australia.

The Best Lawyers in Australia™ 2023

Announcing The Best Lawyers in Germany™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Germany.

Black, red and yellow stripes