Question: Two of my employees were laid off over the last year because of the pandemic, and one employee resigned.  An employee I laid off in January 2021 just called me asking if I was going to pay his COBRA premiums.  Am I responsible for his premiums?

Answer: On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”). Among other provisions, ARPA created a 100% COBRA premium subsidy and additional COBRA enrollment rights for certain employees (and their families) who lost group health plan coverage due to an involuntary termination of employment or a reduction of hours.

COBRA requires an employer-sponsored group health plan to give employees who otherwise would lose coverage due to termination (or another qualifying event) a chance to continue to buy coverage for themselves and any family members on the plan for a limited period after the qualifying event. The maximum coverage period is generally 18 months.  Under the ARPA, from April 1, 2021 through September 30, 2021, group health plans providing COBRA continuation coverage (or continuation coverage under state COBRA laws) must offer a 100 percent tax-free subsidy of COBRA premiums for “assistance eligible individuals” (AEIs) and their qualified beneficiaries.  AEIs who elect continuation coverage will not receive a payment for the premium assistance. Instead, the COBRA premium amount is advanced by the employer or plan, which will then be reimbursed by the federal government through a refundable credit against payroll taxes.

An individual is an AEI if he or she qualifies for COBRA coverage due to an involuntary termination of employment or reduction of hours.  Individuals who qualify for COBRA coverage due to other qualifying events, such as a voluntary termination of employment, are not AEIs and are not eligible for the premium subsidy. The subsidy does not apply to employees or family members who are or become eligible for other group health coverage or Medicare.

ARPA also provides a “second chance” election for individuals who did not initially elect COBRA or who let their COBRA coverage lapse prior to April 1, 2021 but are still within the 18-month COBRA eligible period.  Individuals who experienced an involuntary termination of employment or a reduction of hours so that COBRA would have started sometime within the 18 months prior to April 1, 2021, but who did not timely elect COBRA, may still elect subsidized COBRA coverage prospectively.  Additionally, individuals who had elected COBRA coverage but discontinued such coverage before April 1, 2021 are eligible to re-elect COBRA coverage if they would otherwise be AEIs and are still within their COBRA coverage period.

Employers or plan administrators must determine which employees/beneficiaries lost health plan coverage beginning on or after November 1, 2019 because of an involuntary termination of employment or reduction in hours.  For eligible individuals who become entitled to COBRA coverage from April 1 to September 30, 2021, the employer or plan administrator must include notice of the availability of premium assistance with its usual COBRA notice.  For other individuals who are still within their COBRA eligibility period who are receiving coverage or declined or dropped coverage, the employer or plan administrator must send notice of the availability of premium assistance and, if applicable, the extended COBRA election period.  The deadline to provide this notice is May 31, 2021.  Thereafter, the individual or beneficiary has 60 days after receiving a notice of the COBRA subsidy to make the election.

Additional guidance and model notices are available at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy.