By: Nina Lucibello, Chantal N. Guerriero, Esq. and Ty Hyderally, Esq.

In March 2021, President Biden signed the American Rescue Plan Act (“ARPA”) into law, a plan to deliver immediate economic relief to families that have been impacted by the COVID-19 pandemic.  Much of the excitement surrounding ARPA stems from the $1,400 stimulus checks that income-qualifying individuals are to receive as a result of the plan. However, ARPA also includes a subsidy concerning the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).

COBRA was passed in 1985, as a means of continuing group health insurance coverage for employees and their families after job loss or other qualifying events.  Qualifying events include loss of health benefits due to voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.  As such, COBRA provides qualifying individuals the opportunity to continue their health benefits for a limited period of time. Normally under COBRA, qualified individuals may be required to pay their entire premium for coverage, of up to 102% of the cost to the plan.  However, the COBRA subsidy requires insurers and employers to provide “assistance eligible individuals” (“AEI”) with a 100% subsidy for COBRA premiums during the time period from April 1, 2021 to September 30, 2021 (the “subsidy period”).

AEI includes those who were involuntarily terminated or received a reduction of work hours as a result of the pandemic, individuals who are not otherwise eligible for Medicare or other group health plan coverage, and those individuals who actually elect to receive COBRA coverage.  AEI also includes current employees, former employees, and their eligible dependents. However, if an employee voluntarily terminates his/her job, then the employer is not required to provide COBRA coverage.  Further, individuals that are eligible for Medicare or other group health plan coverage are not eligible to receive COBRA coverage. 

The COBRA subsidy is entirely funded by the federal government through Medicare tax credits.  Thus, employers will recover the entire COBRA premium subsidy for each AEI, including the 2% administrative fee. Further, the COBRA provision requires several participant notices to ensure that eligible individuals receive coverage, if they choose to.  As such, employers should be sure to identify individuals who are currently enrolled in COBRA coverage, as well as individuals who were eligible but have declined or discontinued their COBRA coverage, and notify them of this temporary change in legislation.

COBRA has already helped so many individuals receive health coverage following a change in their employment.  Now, ARPA’s COBRA subsidy is able to help even more individuals receive the assistance they need, with premiums fully covered by the federal government.  The COBRA subsidy should not be overlooked, as it is a great addition to ARPA’s already great stimulus plan.  Employees who are interested in receiving COBRA benefits should talk to their employers to learn more and discuss their eligibility.  Moreover, employees who are qualified but declined such coverage by their employers should seek legal advice as to their recourse.  

En nuestra firma hablamos español. This blog is for informational purposes only.  It does not constitute legal advice, and may not reasonably be relied upon as such.  If you face a legal issue, you should consult a qualified attorney for independent legal advice with regard to your particular set of facts.  This blog may constitute attorney advertising.  This blog is not intended to communicate with anyone in a state or other jurisdiction where such a blog may fail to comply with all laws and ethical rules of that state of jurisdiction.