As part of the recently enacted American Rescue Plan Act of 2021 (“ARP”), certain COBRA eligible individuals are eligible for temporary premium subsidies April 1 to September 30, 2021. These subsidies will cover 100 percent of the premium for certain individuals who qualify for COBRA coverage. It will be up to the former employer to pay the COBRA premium for subsidy-eligible individuals; employers can then take a credit against their Medicare payroll taxes to cover the cost of the subsidy.
Former employees who qualify for the temporary subsidy are called Assistance Eligible Individuals and include:
Individuals who voluntarily leave employment or become eligible for COBRA for any other reason are not Assistance Eligible Individuals and are not eligible for the subsidy. Furthermore, if an individual becomes Medicare eligible or becomes eligible for other group health plan coverage between April 1 and September 30, the individual is no longer eligible for the subsidy. If an individual becomes eligible for other health care coverage, the individual is obligated to notify the former employer of the eligibility change or face a monetary penalty.
The ARP also imposes new COBRA notice requirements to ensure that Assistance Eligible Individuals understand their options and any obligations:
Failure to follow the new notice requirements will be treated as a failure to follow COBRA’s notice requirements.
Employers will need to: