*Last edited March 26, 2021. We will continue to update as we learn more.

On March 11, 2021, President Biden signed a $1.9 trillion stimulus relief bill into law to help combat the financial impact of COVID-19 on Americans. The American Rescue Plan Act (ARPA) provides economic relief in many different forms, including some significant changes to healthcare and other functions of the HR industry.

From a healthcare perspective, temporary 100% COBRA subsidies are the biggest change that require some immediate action for employers. With these changes come a lot of unanswered questions regarding how administration will work. We have included a summary of the impact on COBRA below and will continue to share more as we learn more.

COBRA Changes

Provides 100% subsidy for COBRA continuation coverage to eligible individuals beginning April 1, 2021 and ending on September 30, 2021.

Who is an Eligible Individual?

  • Only for employees and/or former employees that are COBRA eligible due to involuntary termination or reduction in hours
  • Applies retroactively to any employees and/or former employees that would still be on COBRA had they elected the full duration when they initially became eligible
  • Eligible Individuals may include the employees’ and/or former employees’ spouses and dependents

How long will it last for each Eligible Individual?

Coverage begins the later of:

  • April 1, 2021; or
  • The date of involuntary termination or reduction in hours occurring prior to September 30, 2021.

Coverage ends the earliest of:

  • September 30, 2021;
  • 18 months* from the original COBRA qualifying event date
    • (Note: We are still awaiting clarification if we will need to go back 36 months pursuant to New York’s COBRA rules);
  • The date the Eligible Individual becomes eligible for Medicare; or
  • The date the Eligible Individual becomes eligible for coverage through a new employer or a family member’s employer.

What is the Special Enrollment Period?

  • Previously COBRA qualifying Eligible Individuals (as defined above) that are not enrolled in COBRA as of April 1st will have an additional opportunity to do so. Their options are:
    • Elect coverage back to the date of their original COBRA qualifying event and pay all premiums owing by March 31, 2021; or
    • Begin coverage as of April 1, 2021, through their remaining eligibility date (as defined above).
  • Eligible Individuals will have 60 days from the date they receive a new notice outlining these options to elect coverage

What notices are required?

  • A notice will need to be sent to any potential Eligible Individuals as identified above outlining their COBRA election options and special enrollment rights
    • The model notice is due to be published by April 10, 2021
  • For Eligible Individuals whose eligibility will expire prior to September 30, 2021, a notice will need to be sent advising of the subsidy expiration between 15-45 days prior to the expiration date
    • The model notice is due to be published by April 25, 2021

How will the subsidy be paid?

  • For employers subject to federal COBRA laws (20+ employees), the subsidy will need to be paid by the employer and recouped via tax credit on the quarterly IRS Form 941.
  • For employers subject to NYS COBRA only (less than 20 employees), we are awaiting clarification on how the subsidy will be paid out.

Action Items

As your COBRA administrator, the team at Bond Benefits Consulting can help you navigate through the next steps:

  • Begin identifying any potential Eligible Individuals
    • Our recommendation: look back at those involuntarily terminated over the last 36 months
  • Be ready to mail out new notices
    • Our recommendation: don’t mail anything until the model notices are released
  • Implement a tracking system to be ready to send notices when COBRA eligibility is ending
  • Work with your payroll provider and/or accountant to ensure proper tracking of COBRA premium subsidies and tax credits

Is Bond Benefits Consulting currently handling your COBRA administration? If you don’t want to tackle these changes alone, click here.