On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) which requires most employers to temporarily pay for health insurance continuation coverage (commonly referred to as COBRA) during the period between April 1 and the earlier of September 30, 2021, when the individual becomes eligible for Medicare or other group health insurance (through, for instance, a spouse or new employer) or when the individual’s 18 or 12-month continuation period expires). This ARPA coverage applies to employees (and their qualified family members) whose hours were reduced, were laid off or were involuntarily terminated (for other than gross misconduct) anytime after October 2019, but who are still within the 18 month COBRA continuation period (or similar 12 month continuation period under Ohio’s mini-COBRA statute). ARPA applies to for-profit, governmental, non-profit, large and small employers (who might not even be otherwise subject to COBRA), who will receive a credit against their Medicare payroll taxes for the amount of ARPA coverage provided in 2021. On April 7, 2021, the DOL released FAQs and model notices for employers to provide to potentially eligible employees, including: a Notice for Assistance Eligible Individuals (AEIs) who experience a qualifying event between April 1 and September 30, 2021; a Notice for AEIs who experienced a qualifying event prior to April 1, 2021 and are either currently enrolled, never enrolled or discontinued COBRA coverage; a Notice to be used by plans subject to Ohio's Mini-COBRA statute; a Notice of Expiration Period; and a summary of the ARPA premium assistance and Request for Treatment as an AEI form.
Employers (and their COBRA administrators) should identify those former employees who are still within their 18 month COBRA (or, if applicable 12 month mini-COBRA) continuation period and send them the required notices before the end of May. Even if the former employees never elected COBRA or dropped such coverage, they are entitled to elect within 60 days the new free (to them) ARPA coverage retroactive to April 1, 2021 if they have not become eligible for Medicare or another group medical plan. Employees are not required to elect the new ARPA coverage (and may not want to do so if they already purchased an individual health plan which will not permit them to drop or to re-enroll once the ARPA coverage lapses, the individual plan has better benefits or deductible, they have already reached their deductible and do not want to start over with a new plan, or are concerned about losing tax subsidies, etc.). Employees terminated after April 1 can receive the model notice with their regular COBRA notice (or it can be sent separately).
The DOL has provided a model “alternative” notice to former employees
of small employers who are eligible for the ARPA coverage, but only under Ohio’s
mini-COBRA statute. This form requires
a remarkable amount of editing by employers and/or their health plans. Notably, ARPA does not change the election
deadlines for Ohio’s mini-COBRA statute and it does not appear as though employees
only covered under Ohio law may be entitled to ARPA coverage if they did not
first timely elect and maintain continuation coverage under Ohio law.
Q6: Does the ARP change any State program requirements or time periods for election of continuation coverage?
No. The ARP does not change any requirement of a State continuation coverage program. The ARP only allows Assistance Eligible Individuals who elect continuation coverage under State insurance law to receive premium assistance from April 1, 2021 through September 30, 2021. It also allows Assistance Eligible Individuals to switch to other coverage offered to similarly situated active employees if the plan allows it, provided that the new coverage is no more expensive than the prior coverage. See Q15 and Q17 for more information.
Employers are also required to notify former employees between 15 and 45 days before their ARPA coverage is about to expire and the DOL has provided a Notice of Expiration of Period for such purpose.
The statute and FAQs do not address a host of outstanding issues and ambiguities and the IRS has not yet issued any guidance about the available tax credits or refunds.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to different
results. Information here can change or be amended without notice. Readers
should not act upon this information without legal advice. If you have any
questions about anything you have read, you should consult with or retain an
employment attorney.
