March 19, 2021 Article

New COBRA Premium Subsidies Take Effect April 1, 2021

The recently enacted American Rescue Plan Act of 2021 (ARPA) makes temporary but significant changes to Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) coverage rules. They provide:

  • A 100% subsidy for COBRA premiums paid for any coverage provided between April 1 and September 30, 2021;
  • Another opportunity to elect COBRA coverage for qualified beneficiaries who previously did not elect COBRA or who previously elected COBRA and dropped the coverage; and
  • The option to allow COBRA covered individuals the chance to change their benefit election to a cheaper option.

Premium Assistance

ARPA provides that Assistance Eligible Individuals (AEIs) will not have to pay premiums for COBRA coverage provided between April 1, 2021 and September 30, 2021. Instead, employers or other persons to whom these amounts were to be paid are now required to pay these COBRA premiums (including applicable administrative fees) and claim an off-setting tax credit for these amounts.

An AEI is a qualified beneficiary who, between April 1 and September 30, 2021, is eligible for COBRA coverage due to an involuntary termination (other than for gross misconduct) or a reduction in hours and elects such coverage. Individuals whose COBRA coverage arises from a voluntary termination are not entitled to premium assistance. The premium subsidy ends upon the earliest date on which the AEI’s maximum COBRA period ends or the AEI becomes eligible for either other group health plan coverage that is not limited to excepted benefits or Medicare.

Additional Assistance Eligible Individuals

Individuals who were eligible to elect COBRA continuation coverage due to involuntary termination but who had not yet elected coverage as of April 1, 2021, or who had elected such coverage but discontinued it prior to April 1, 2021, are also entitled to COBRA premium assistance. These AEIs must elect COBRA coverage during a period that begins on April 1, 2021 and ends 60 days after the plan administrator provides a notice that they qualify for the new COBRA premium assistance program. These notices must be provided no later than May 31, 2021. Model notices are to be issued by the U.S. Department of Labor (DOL) no later than April 10, 2021.

Permissible Coverage Election Changes

ARPA also allows but does not require plan sponsors to permit qualified beneficiaries to switch their group health plan elections to a different employer-sponsored plan provided that:

  • The premium cost for that plan is not higher than for the plan in which the qualified beneficiary is already enrolled;
  • The plan sponsor offers the plan to similarly situated active employees; and
  • The coverage is not just for excepted benefits, a qualified small employer health reimbursement arrangement (QSEHRA), or a health flexible spending arrangement (HFSA).

Premium Assistance Notices

Premium assistance notices can be included in the COBRA election notice regularly used by the plan sponsor or provided as a separate document. They must be in writing, must be clear and understandable, and must:

  • Describe any forms necessary for establishing COBRA premium assistance eligibility;
  • Provide the name, address, and telephone information for the plan administrator or other individual maintaining relevant information regarding COBRA premium assistance;
  • Explain the extended election period available to the those were eligible to elect COBRA coverage on or after April 1 but who have not done so or who already elected but then discontinued COBRA coverage (the additional Assistance Eligible Individuals described above);
  • Notify qualified beneficiaries of their obligation to tell the group health plan if they become eligible for other group health coverage or Medicare and the penalty for failing to do so;
  • Prominently describe the right to subsidized coverage and any conditions for receiving subsidized coverage; and
  • If permitted by the plan sponsor, describe the option to enroll in different coverage.

Notice of Expiration of Premium Assistance

Except when COBRA coverage ends because an individual becomes eligible for other group health coverage or Medicare, plan administrators must provide a separate written notice AEIs prior to the expiration of premium assistance that clearly states when the premium assistance will end. It must also explain that the individual may still be eligible for COBRA or other group health coverage without premium assistance.

The premium assistance expiration notice must be provided during the period that begins 45 days before premium assistance will expire and ends 15 days before premium assistance expires. The DOL will provide model premium assistance expiration notices by April 25, 2021.

Premium Assistance Tax Credits

Under ARPA employers that pay the COBRA premium will entitled to a dollar-for-dollar credit toward the payment of quarterly employment taxes. The credit is not available for any amount paid for which the employer is also claiming a tax credit as qualified wages under the health coverage provisions of the Families First Coronavirus Relief Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security Acts (CARES Act).

Employers must also refund any COBRA premiums paid by individuals who were eligible for premium assistance for any period of coverage between April 1, 2021, and September 30, 2021. These refunds must be made no later than 60 days after the date on which an individual made the premium payment. A tax credit can also be claimed to offset these refunded premiums. The Treasury Department is expected to provide further guidance on the mechanics of receiving available tax credits at a later date.

Firm Highlights


Legal Lunches: Workin' for the Weekend

Laura Rideout and John Cronan will participate in a panel discussion called "Workin' for the Weekend: Team Safety Including Wage & Hour, OSHA and Workers' Comp in a Post-COVID World" as a part of...


Understanding the New COVID-19 Vaccine Mandate for Healthcare Workers

Many Maine healthcare facilities were already in the process of evaluating, drafting, and implementing mandatory vaccine policies when the Maine Department of Heath and Human Services issued an Emergency Routine Technical Rule on the...


The Latest from OSHA on Mitigating and Preventing the Spread of COVID-19 at Work

On the tails of updated guidance from other agencies, the U.S. Department of Labor Occupational Safety and Health Administration ("OSHA") released new pandemic-related guidance last month. This guidance was issued on June 10, 2021...


Fifteen Preti Flaherty Attorneys Selected as Chambers USA Leaders in Their Field

Fifteen Preti Flaherty attorneys and five practice groups have been selected for inclusion in the 2021 Chambers USA Guide to America's Leading Lawyers for Business , the highly regarded directory of leading attorneys and...


Beyond Maine’s Ban-the-Box Statute: Practical Employer Considerations

In five (5) days, Maine’s Fair Chance Employment Act goes into effect.  We originally summarized the objective and impact of that legislation in an alert posted on August 11, 2021 .  Now is the...


Six Take-Aways from EEOC’s Updated COVID-19 Guidance

The U.S. Equal Employment Opportunity Commission ("EEOC") published guidance in December 2020 advising how EEO laws, including the Americans with Disabilities Act, Title VII of the Civil Rights Act, and the Genetic Information Nondiscrimination...


46 Preti Flaherty Attorneys Selected by Peers for Inclusion in Best Lawyers in America 2022, Including 3 “Lawyers of the Year”

Forty-six Preti Flaherty attorneys have been named to Best Lawyers in America 2022, including four “Ones to Watch” and three “Lawyer of the Year” recipients. Inclusion in Best Lawyers in America is considered a...


Employees Who Refuse to Comply with a Mandatory Vaccination Policy are Generally Ineligible to Receive Unemployment Benefits

Following a nationwide spike in cases, hospitalizations, and deaths, an increasing number of Maine private businesses and colleges have joined the healthcare industry in requiring workers to provide proof of vaccination against COVID-19. Vaccine...


Health Coverage Incentives for Unvaccinated Employees

Employers wrestling with COVID-19 vaccination-reluctant employees have a lot on their plates. New federal mandates may require affirmative action but even without these new rules, the real problem is how to persuade your workers...


New Maine Law Limits Employers’ Ability to Request Applicant Criminal History Information

Last month Governor Mills signed into law LD 1167, “An Act Relating to Fair Chance in Employment.” Maine joins a growing number of states in adopting a “ban-the-box” law that restricts employers’ ability to...