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Biden’s American Rescue Plan (ARP) has reshaped the way Americans receive and qualify for healthcare coverage, including COBRA. Before diving into the specifics of how the ARP impacts recipients of COBRA, it’s best to first define the important healthcare term.
What is COBRA?
COBRA, short for the Consolidated Omnibus Budget Reconciliation Act, provides for the temporary continuation of healthcare coverage to a wide range of individuals when coverage would otherwise be terminated. The cost of COBRA, however, is typically more expensive than the coverage would have been if the individual were still receiving employer-sponsored healthcare.
According to the Department of Labor (DOL) “COBRA requires continuation coverage to be offered to covered employees, their spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain specific events.” The agency notes the COBRA law “generally applies to all group health plans maintained by private-sector employers with 20 or more employees, or by state or local governments.”
How does the ARP impact COBRA coverage?
Included in Biden’s $1.9 trillion rescue plan are provisions that expand the pool of recipients eligible for receiving COBRA. Specifically, individuals that declined COBRA coverage, or previously elected to receive COBRA coverage but discontinued it, effectively gain another opportunity to receive COBRA coverage.
In addition, Section 9501 of the ARP provides premium assistance to help “Assistance Eligible Individuals” pay up to 100% of the cost of COBRA coverage for the duration of April 1, 2021, through September 30, 2021. According to a report by the Kaiser Family Foundation (KFF), the ARP “requires the former employer to pay the COBRA premium for subsidy-eligible individuals; the federal government will then reimburse the former employer for this cost.”
Employers should know that the new eligibility surrounding COBRA assistance and qualifications must be communicated to applicable individuals, e.g., former employees and employees that had their hours reduced. Trusaic can handle this request as a part of its ACA Complete service at no additional cost. Contact us to learn more.
Who qualifies for COBRA premium assistance?
According to the DOL FAQ on COBRA Premium assistance, individuals that qualify for COBRA premium assistance must meet the following criteria:
- Is eligible for COBRA continuation coverage by reason of a qualifying event that is a reduction in hours (such as reduced hours due to change in a business’s hours of operations, a change from full-time to part-time status, taking of a temporary leave of absence, or an individual’s participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced) or an involuntary termination of employment (not including a voluntary termination)
- Elects COBRA continuation coverage
The FAQ notes that individuals may not qualify for premium assistance if they are eligible for other group healthcare coverage. Individuals that had their COBRA continuation coverage expire (generally 18 months) also do not qualify for COBRA premium assistance.
How do these new changes to COBRA impact employers?
Besides having to provide notice to eligible recipients about the new opportunity to obtain COBRA coverage, as well as pay the upfront cost towards COBRA premiums for eligible individuals, employers should take note of how these advancements contribute to the larger theme of enhancing the ACA.
President Biden and the current administration extended special enrollment periods on HR.gov, rolled back association and short-term, limited-duration insurance plans, introduced new measures to increase funding for IRS enforcement efforts, and expanded Premium Tax Credit PTC) eligibility, which has subsequently allowed millions more Americans to obtain quality healthcare coverage.
The enhancements of the ACA are long overdue, and the changes to COBRA are another part of that process. A component of the ACA that has remained the same since it was first enacted, however, is the Employer Mandate.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs), which are employers with 50 or more full-time employees and full-time-equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
If your organization needs assistance meeting the new requirements of COBRA, contact us to learn about ACA Complete. If you are unsure of how to comply with the ACA’s Employer Mandate, download the 2021 ACA Essential Guide for Employers to learn more.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.