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The American Rescue Plan Extends Free COBRA Coverage to Current and Formerly Eligible Enrollees

Niara Stitt, Law Clerk at Freking Myers & Reul

On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law, intending to address and alleviate the economic impact of the COVID-19 pandemic. Of ARPA’s provisions, the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) was modified and expanded to provide free coverage under COBRA from April 1, 2021 until September 30, 2021.

ARPA’s provisions related to COBRA are largely identical to requirements existing before ARPA was passed, especially related to eligibility and coverage windows. Like COBRA, ARPA covers employees terminated from employment or subjected to decreased work hours, and excludes employees who resign or are terminated for “gross misconduct.” Similarly, ARPA does not extend beyond the pre-existing 18 to 36 month coverage window.

The COBRA assistance program is made to be seamless with previous operations: if an enrollee was or is eligible for COBRA, their premium payments are to be considered paid automatically. The program must be offered to both eligible beneficiaries enrolled in COBRA and non-enrolled but eligible individuals. Non-enrolled eligible recipients include 1) individuals who previously had a right to COBRA coverage, and 2) individuals who previously used COBRA and discontinued coverage before April 1, 2021.

As with regular COBRA coverage, the ARPA requires employers to provide eligible employees with notice of the extended coverage. The Department of Labor will issue guidance for identifying eligible enrollees, as well as a model notice for employers to use when notifying eligible enrollees by April 10, 2021, and employers must give notice to eligible enrollees by May 30, 2021. Because of this deadline, non-enrolled individuals eligible for COBRA may have their coverage retroactive back to April 1, 2021.

Federal COBRA applies to employers with 20 or more employees, while state-level continuation coverage (often called “mini COBRA”) applies to employers with fewer employers. The ARPA extends free coverage to those receiving benefits under a mini-COBRA program.

This extension should encourage workers to seek coverage under COBRA, or mini-COBRA for the next several months, especially because coverage may be retroacted to April 1. If you believe you are entitled to COBRA coverage, your former employer must notify you of your eligibility by the end of May. For more information about the American Recue Plan Act, its impact on COBRA, and upcoming guidance from the U.S. Department of Labor, click here.

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