The American Rescue Plan Act of 2021 (the Act) became effective on March 11, 2021. It provides six months, from April 1, 2021 – September 30, 2021, of free health care coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to laid off employees and their covered dependents.
The Act applies to employees who have been laid off, i.e., involuntary termination or involuntary reduction in hours, over the past year and who would have been covered by COBRA at the time of their termination. Typically, upon termination, employees have 60 days from receiving notice of COBRA eligibility to sign up for the benefit. Under the Act, eligible employees are those who are already enrolled in COBRA, did not elect COBRA at the time it was available to them, or elected COBRA at the time it was available to them but let the coverage lapse. Coverage applies to individuals whose COBRA coverage expires, or would have expired had they elected it or did not allow it to lapse, during or after April 1, 2021 – September 30, 2021. This means that individuals are not receiving an extension to their 18-month COBRA period under the Act—generally, it is applicable to employees who were eligible in November 2019 or later. Notably, if a COBRA period starts after April 1, 2021 or ends before September 30, 2021, this subsidy will be provided for fewer than six months.
Under the Act, Employers will receive reimbursement for the premium amounts from the federal government as tax credits. Employees who qualify may sign up through their previous employer.
Individuals who begin working for a new employer and receive health insurance coverage through that new employer or those who receive Medicare, prior to the September 30, 2021 provision end date, will lose coverage under the Act.
Employers are required to send former employees COBRA notices of eligibility. These notices will provide employees with a notice of their right to the new subsidy, when their subsidy would end, an enrollment window, contact information for additional information, and the individual’s obligation to notify the plan when he or she becomes eligible for healthcare through a new employer or Medicare. The notices will need to be distributed by employers within 60 days of April 1, 2021. The Department of Labor will provide model notices by April 10, 2021.
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