New COBRA and State Continuation Rules

The American Rescue Plan Act of 2021 (ARPA) was signed on March 11, 2021. The Act includes a variety of provisions designed to provide relief to individuals and businesses struggling due to COVID-19. Among the provisions includes a temporary 100% COBRA subsidy for COBRA/State Continuation qualified beneficiaries.

Qualifications and Details

  • Subsidies apply to all coverage periods beginning on April 1, 2021 and will end on September 30, 2021.
  • The subsidy is only available to an assistance eligible individual (AEI). An AEI is an individual (both employees and their dependents) who lost or will lose coverage due to any of the reasons below during the subsidy timeframe outlined above:
    • Individuals who lost/will lose coverage due to an involuntary termination of employment (discharge or layoff) or due to a reduction of hours.
    • Individuals who lost coverage and did not elect COBRA but were eligible for the premium subsidy.
    • Individuals who elected then terminated coverage prior to 4/1/21 and were otherwise be eligible for the premium subsidy.
  • The AEI does not pay the COBRA/State Continuation premium directly, the subsidy premium is “advanced” by the employer or insurance carrier then reimbursed by the government through a refundable tax credit. Responsibility for these advance payments will depend on which market your plan is in, the insurance carrier, and the size of your company.
  • Individuals who already had an involuntary termination of employment or reduction in hours within the last 18 months and did not elect into or chose to drop COBRA, must be given a new Special COBRA Election period. These individuals will be able to elect COBRA coverage within 60 days of receiving the required employer notice. The resulting COBRA continuation coverage will begin on the first period of COBRA continuation coverage beginning on or after April 1, 2021 – making the special election prospective instead of retroactive to what their original effective date for COBRA coverage or when their coverage originally lapsed.
  • AEI’s will no longer be eligible for the subsidy:
    • After September 30th, 2021 or;
    • If the individual’s maximum period of COBRA coverage ends prior to September 30th or;
    • If they become eligible for coverage under another group health plan or Medicare.

Notices

There are three required notices employers must send to AEI’s to stay in compliance with this provision.

  1. A Summary of COBRA Premium Assistance notice.
  2. An initial election notice to allow AEI’s to elect in coverage and/or the subsidy. There are three different initial election notices that are for the different types of assistance eligible individuals. Initial notices must be mailed out before May 31st, 2021.
  3. A notice of expiration provided to individuals at least 15 days, but no more than 45 days, before their subsidized COBRA coverage will expire.

Next Steps

StaffScapes will review Assistance Eligible Individuals for our Client’s health insurance plans, reach out to Clients to confirm termination reasons for employees, and may assist with required notices to AEI’s. Please reach out to StaffScapes for more clarification on the scope of assistance provided for your company.

Please note that if a Client’s insurance carrier elects not to cover subsidies, Clients will be responsible for the “advance” premium for any AEI’s that elect in the subsidy for their health insurance plan. Due to the co-employment relationship with StaffScapes, the refundable tax credit will be applied to the PEO’s tax reports. StaffScapes will refund the advanced premium to the client once the tax credit is received from the IRS, no sooner.