Devine Millimet | NH Law Firm

Expansion of COBRA Benefits under the American Rescue Plan Act of 2021

Nicole Bodoh, Esq.

March 26, 2021

The American Rescue Plan Act of 2021 (the “Act”), which President Biden signed into law on March 11, 2021, provides for significant enhancement of COBRA coverage benefits for certain displaced workers.  The Act provides “assistance-eligible individuals (“AEIs”) with a subsidy for 100% of the COBRA premium paid to continue coverage during the period beginning April 1, 2021 and ending on September 30, 2021 (or at the end of the AEIs otherwise applicable COBRA coverage period if earlier). 

To qualify for the premium subsidy (and be considered an AEI), the employee must have been involuntarily terminated from employment or experienced a reduction in hours triggering COBRA coverage.  The premium subsidy does not apply to employees who voluntarily terminate their employment.  Notably, the termination or reduction in hours is not required to be related to the COVID-19 pandemic.  In addition, individuals who would have been AEIs (because their COBRA coverage period would have extended beyond April 1, 2021) but previously declined coverage are eligible to elect coverage and take advantage of the subsidy.

The Act requires employers to provide notice to AEIs of the availability of premium assistance and outlines the information required to be contained in the notice, which includes the terms and conditions under which the AEI may apply for the premium subsidy.  Employers must also provide notice to AEIs when the premium assistance ends.  The Departments of Labor, Treasury and Health and Human Services must issue a model notice of the subsidy within thirty (30) days after the Act’s effective date, and must issue a model notice of the expiration of premium assistance within forty-five (45) days after the Act’s enactment.  Upon receipt of notice of the premium subsidy, AEIs will have sixty (60) days to elect COBRA coverage, which will be retroactive to April 1, 2021. 

Under the Act, employers who sponsor fully-insured or self-funded health plans subject to COBRA will be required to pay the cost of the subsidy and then claim the amount as a credit against their quarterly Medicare payroll tax liabilities. 

Additional guidance is expected to be issued by regulators to clarify some of the questions arising out of these provisions of the Act including whether the COBRA premium relief applies only to major medical benefits or extends to dental and vision coverage.  

Please contact any of the attorneys in Devine Millimet’s Labor, Employment and Employee Benefits Practice Group with questions regarding COVID-19 compliance matters.

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