The economy has provided a bit of a roller coaster over the past year, with many Americans losing their health insurance along the way. In many of these cases, job loss and other circumstances have opened up COBRA coverage for these individuals.
COBRA coverage allows those who have lost their jobs, and therefore their group benefits plans,to continue their health insurance coverage. However, because the individual is now responsible for paying the premiums, rather than the employer pitching in for some or all of that cost, COBRA has not always been utilized by many. A job loss typically meant that the suddenly-uninsured could not afford COBRA premiums.
The American Rescue Act, recently passed by Congress and signed into law, seeks to change those circumstances. Now, group health plans subject to COBRA must offer a 100 percent subsidy to anyone eligible for coverage (plus their dependents). This requirement began April 1 and will continue through September 30. This means the plan owner, not the eligible individuals, will cover premiums. ARP regulations clarify that the subsidy provisions apply to all group health plans sponsored by employers, subject to federal COBRA rules under ERISA and/or state mini-COBRA (Cal-COBRA).
This rule change applies to healthcare plans, along with dental and vision coverage, but does not include health flexible spending accounts.
Who is eligible for COBRA subsidies?
The law defines “assistance eligible” individuals (and their families) as those who would qualify for COBRA due to involuntary unemployment or a reduction in work hours. This includes people who would have been eligible for COBRA during the past 18 months, but chose not to elect coverage at that time. They can now enroll and obtain a subsidy to help with premiums.
Former employees who voluntarily terminated employment, or those eligible for COBRA for other reasons, cannot claim the subsidy.
How are premiums paid?
Premiums will be paid upfront by the employer or the insurer, and then reimbursed via federal payroll tax credits. Employers should prepare for this expense now, because some time will pass between paying the premiums and receiving reimbursement. Please call our office immediately if you have questions about COBRA subsidies or how these rules apply to your situation.