COBRA Continuation Coverage under the America Rescue Plan Act (ARPA) – What Employers Need to Know
by Marsha R. Kunz, Director of Human Resources
The American Rescue Plan Act of 2021, signed into law by President Biden on March 11, 2021, provides for a 100% COBRA premium subsidy for employees and/or their covered dependents who choose to continue on their employer-sponsored health plan after the occurrence of one of the following events:
– Involuntary termination of employment;
– Layoff from job;
– Reduction in hours causing a loss of healthcare benefits.
The benefit is not available to those employees who leave their employment voluntarily.
This benefit can take away the stress of shopping for another, less familiar plan and relieve the financial burden to continue health insurance for a former employee and/or their dependents. Employers will receive a refundable payroll tax credit equal to the amount of premiums they pay on behalf of employees electing COBRA coverage during this period.
Following this portion of the ARPA will present a compliance challenge for employers. They will have some decisions to make such as:
• Whether to offer laid-off employees up to 90 days after receipt of their COBRA notice to enroll in a different group health plan that employer offers, although the premium for the other coverage is not to be higher than the employee’s previous health plan choice.
• During the pandemic, some employers chose to pay for or subsidize the cost of health insurance if they laid-off or reduced the hours for the employee. If this has been the case, those employers will need to navigate the administrative issues that may occur with such situations.
• Employers will need to ensure that the temporary COBRA changes are communicated to current employees and those currently on COBRA. It will also be the responsibility of employers to look up those employees who became COBRA eligible, under the above rules, in 2020 (and even as far back as November 2019) in case they may still be on COBRA. Employers need to ask themselves if they want to administer COBRA or contract with an experienced vendor to manage it for their company.
Currently, a majority of COBRA-mandated employers utilize a third party to administer their COBRA because it is such a complex task, which involves issuing new hire notices, sending qualifying event notices and collecting premiums, all within strict timeframes. Even if an employer uses a third-party administrator, the ultimate burden of compliance is on the employer.
In general, COBRA is applicable to employers who have a minimum of 20 employees (counting both full and part-time employees) who worked more than 50% of business days during the previous calendar year. Click Here – for a helpful formula and additional information and resources provided by the Department of Labor related to coverage under COBRA.
In addition to the above, the ARPA also gives access to federal subsidies for those who buy healthcare coverage in the ACA (Affordable Care Act) marketplace exchange via elimination of the subsidy cutoff if an exchange plan buyer earns more than 400 percent of the federal poverty level or approximately $51,520.
Employers or their third-party administrators can expect “model notification” guidance shortly so stay tuned.
Please feel free to reach out to your trusted BRC advisor if you have any questions regarding these new ARPA requirements.
Marsha R. Kunz Director of Human Resources
Marsha is the Director of Human Resources for the firm. She oversees all of the human resource-related opportunities and challenges that come with a growing firm. She has a thorough knowledge of human resources issues and stays abreast of the latest developments related to employment law compliance, benefits, management/staff training and working environments. In […]