The HR and COBRA Implications of the ARPA

April 13, 2021
cobra-arpa-sign

President Biden signed the American Rescue Plan Act into law on March 11. The new COVID-19 relief bill includes direct checks to Americans as well as many other clauses that will impact healthcare and benefits in our country. For employers, the $1.9 million relief package will have major implications for HR and COBRA administration.

COBRA Subsidies Under the ARPA

The American Rescue Plan Act (ARPA) includes a provision that creates COBRA subsidies for qualifying individuals.

Federal law requires employers with 20 or more employees to offer COBRA continuation health coverage when coverage would otherwise be terminated for a qualifying event. States laws often require smaller employers to offer COBRA continuation coverage as well. However, beneficiaries may have to pay up to 102% of premium costs out of pocket, making this an unaffordable option for some.

The ARPA changes this, at least temporarily. According to the DOL’s FAQ, group health plans that provide COBRA continuation coverage must offer a full subsidy to assistance eligible individuals between April 1, 2021, and September 30, 2021.

  • Not all COBRA qualifying events will qualify beneficiaries for the subsidies. To be considered an assistance eligible individual, the beneficiary must have lost coverage due to involuntary termination or reduction in hours. The beneficiary must also elect COBRA.
  • Employers will be entitled to a tax credit for the amount of the premium assistance.
  • The subsidies may apply to beneficiaries who are eligible for COBRA continuation coverage under federal or state laws.

What Do Employers Need to Do?

Employers have very little time to prepare for the ARPA. In fact, the COBRA subsidy requirements have already taken effect. Additionally, individuals who had a qualifying reduction in hours or involuntary termination and either declined COBRA or dropped coverage may need to be given a second chance to elect coverage.

The new law requires employers to send certain additional notices:

  • A general notice must be sent to all assistance eligible individuals with an involuntary termination or reduction in hours between April 1, 2021, and September 30, 2021. This notice can be sent with the COBRA election notice or separately.
  • A notice of an extended COBRA election period must be sent to assistance eligible individuals who had a qualifying event before April 1, 2021, and whose maximum COBRA continuation coverage period would not have ended before April 1, 2021. This notice must be sent by May 31, 2021.

Other Implications of the ARPA

The ARPA is a massive piece of legislation with many other provisions that may impact employers. Included among these changes is a follow-up to the Families First Coronavirus Response Act, which created mandatory paid leave. According to SHRM, the new law does not reinstate this requirement, but it does provide tax breaks for employers that provide the paid leave voluntarily.

The American Rescue Plan Act also has implications for the ACA, Medicare, Medicaid and CHIP, and it provides funding for various programs.

The requirements and implications of this new law are a great reason to review your business insurance policy to ensure you have adequate legal coverage. The expert team of attorneys at Heffernan Insurance Brokers will assist you with legislative & compliance regulations. Contact us today to discuss your insurance coverage needs and visit our blog for the latest updates on health care reform.