Anyone who lost a job that provided group health insurance knows that COBRA continuation coverage can be a lifesaver. They also know that the costs of maintaining that coverage can be astronomical if not prohibitive, especially for someone looking for a new position. For workers who rely on COBRA coverage or are considering enrolling because of a layoff or termination, President Biden’s recently enacted American Rescue Plan of 2021 (ARP) provides significant relief, including subsidies that effectively make health insurance free for several months.
Specifically, the ARP includes a 100 percent COBRA premium subsidy for an “assistance eligible individual” during periods of COBRA continuation coverage from April 1, 2021, through September 30, 2021.
If you are on COBRA or want to enroll due to the subsidy, here is what you need to know:
COBRA Continuation Coverage in General
For participants and beneficiaries enrolled in an employer-sponsored or provided group health insurance plan, COBRA allows them to continue that coverage after a “qualifying event” occurs. That event is typically the involuntary termination of employment or a reduction in hours that results in a loss of coverage under their employer’s plan.
Eligible employees have an election period of at least 60 days to decide whether to continue coverage. This election period starts when an employee receives a legally required election notice from their employer or the date they would lose coverage, whichever is later. COBRA continuation coverage can last for up to 18 months, with some exceptions.
When an employee elects COBRA continuation coverage, they must pay the full premium to remain on their employer’s group plan. This can be a financial shock after months or years where the employer paid all or most of their coverage premiums or deducted a portion of the premium from their paycheck.
“Assistance Eligible Individuals” Who Can Receive COBRA Premium Assistance Under the ARP
The 100 percent premium subsidy established by the ARP is available to an “assistance eligible individual” (AEI), defined (in IRS Notice 2021-31) as an individual who:
- Is a “qualified beneficiary” under COBRA due to involuntary termination of employment or reduction of hours.
- Is eligible for COBRA coverage for some or all of the COBRA premium subsidy period (April 1, 2021, through September 30, 2021).
- Elects COBRA continuation coverage.
Otherwise eligible individuals cannot receive the premium subsidy if they can enroll in other group health coverage, such as through a new employer or a spouse’s plan, or if they are eligible for Medicare.
Individuals who quit their jobs typically do not qualify for COBRA continuation coverage, which is why premium assistance is only available to those who lost their jobs due to involuntary termination (and those whose reduction of hours takes them off their employer’s plan). However, in a lengthy list of FAQs about the ARP’s COBRA provisions, the IRS recently clarified what constitutes “involuntary termination” for purposes of the subsidy.
Specifically, the IRS states that involuntary termination means:
“a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services.”
The FAQs issued by the IRS address several specific issues likely to arise when determining whether a termination was involuntary, such as workplace safety issues, the inability to obtain childcare, and retirement.
Additional COBRA Election Opportunity
Besides the 100 percent subsidy, the ARP establishes an “extended election period.” Individuals who previously declined or discontinued COBRA coverage may elect coverage and use the subsidy if they would be an Assistance Eligible Individual if enrolled in COBRA during the April 1, 2021, through September 30, 2021, subsidy period.
How to Get COBRA Premium Assistance
Employers must notify qualified beneficiaries about the availability of COBRA premium assistance and other information about their rights under the ARP. This includes any forms necessary for enrollment, including forms to indicate that you are an Assistance Eligible Individual and to confirm that you are not eligible for another group health plan or Medicare. Employers were required to provide this notice by May 31. If you believe you are (or may be, upon a COBRA election) an AEI and have not received a notice from your employer, you may notify your employer of your request for treatment as an AEI.
Outten & Golden: Protecting the Rights of Workers
If you have questions about COBRA subsidies and continuation coverage or your rights under the ARP, we welcome the opportunity to meet with you. Please contact the employment attorneys at Outten & Golden today.