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On Thursday, March 11, President Biden signed the American Rescue Plan Act of 2021 into law. The rescue plan affects a number of issues surrounding employer-provided health coverage, specifically triggering a number of changes in COBRA coverage for employees who lost their jobs or had a reduction in hours since November 2019. Jackson Walker ERISA partner Greta Cowart explains some of the changes for employer-provided health coverage in the American Rescue Plan Act and what those changes mean for employers who need to understand their responsibilities.
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Greg Lambert: Hi, everyone. I’m Greg Lambert and this is Jackson Walker Fast Takes. On March 11th, President Biden signed the American Rescue Plan Act of 2021 into law. The rescue plan affects a number of issues surrounding employer-provided health coverage, and I asked Jackson Walker ERISA partner Greta Cowart to discuss some of those issues.
Greta, thanks for taking the time to talk with me.
Greta Cowart: Thank you, Greg.
Greg Lambert: Let’s start off with the big one: What does the American Rescue Plan Act do to help people who may have lost their employer-provided health coverage?
Greta Cowart: It provides a great opportunity for these people. It enables employees who have lost their jobs due to, basically, a termination of employment or due to a reduction in hours to obtain COBRA coverage at no cost for a limited period.
Greg Lambert: Greta, when would the subsidy start?
Greta Cowart: The subsidy starts on April 1st and runs through September 30, 2021. So, it’s a potential of six months of healthcare coverage with no cost. An individual who is assistance eligible and lost coverage either by termination or reduction in hours between November 2019 through September 2021 is eligible for that free month of COBRA, as long as we’re talking about COBRA ending on September 30, 2021.
So, it covers free COBRA from April 1, 2021, through September 30, 2021. It’s available to employees who may have already declined COBRA or failed to make payment on COBRA and so they lost their COBRA – as long as their maximum coverage period for COBRA of 18 months has not yet been exhausted. And so that means there’s going to be a new election period, so employers have to get ready for that and find all these people.
Greg Lambert: So, what should an employer do right now to get ready for this April 1, 2021 timeframe?
Greta Cowart: Well, Greg, COBRA could be triggered by a lot of different things besides just termination of employment or reduction in hours. What we need to do is have an employer go back and review their records and find all the employees who terminated or had a reduction in hours from November 1, 2019, up to April 1 and identify these people and also find them. They may not have current addresses for them. Then you also need to have a system set up to start catching just those COBRA events that are terminated from employment or reduction hours going forward, because those people have to get a different COBRA notice from everybody else.
Greg Lambert: What new notices or elections are going to be required?
Greta Cowart: There’ll be two big main new notices. One is going to be for the special enrollment period that starts on April 1 and lasts 60 days to allow people who previously lost coverage to now get COBRA on the subsidized basis with no cost to them. The second one is one notice that they’re not used to, and that’s a notice that the subsidy is going to terminate. They’re going to have to be able to send that out 45 days in advance of the termination date on September 30, 2021, and no later than 15 days after that date. But there are other reasons you may want to make sure you get it out on the earlier end of that range.
Greg Lambert: How would an employer recover the funds that they need to spend in order to subsidize these premiums?
Greta Cowart: The good news is while the Congress put the burden on the employer, and the employer would still have to pay for that premium or the cost of the coverage. What they have to do is they have to keep track of that and which people are eligible for the subsidy, and they need to offset the tax credits on their payroll taxes on a payroll tax return. They need to track also whether they’re using these same individuals’ health care coverage for some of the other credits, because you’re not allowed to double-dip. You can either get the COBRA subsidy or you can get, like, for instance, the employee retention tax credit, but you can’t take both – not on the same dollars.
Greg Lambert: Well, sounds like there’s a lot involved in this. So, Greta, thank you very much for taking the time to talk to me about these very substantial changes in employer-provided health coverage.
Greta Cowart: Thank you, Greg.
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Please note: This article and any resources presented on the JW Coronavirus Insights & Resources site are for informational purposes only, do not constitute legal or medical advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Jackson Walker. The facts and results of each case will vary, and no particular result can be guaranteed.
