In addition to infusing financial stimulus to help restart the economy and provide financial support for pandemic recovery, the American Rescue Plan Act (ARPA) enables eligible individuals to receive COBRA benefits without paying any premiums. COBRA – the Consolidated Omnibus Budget Reconciliation Act of 1985 – is a law that requires most employer-provided group health plans to temporarily continue coverage to employees who are terminated or have had an involuntary reduction in hours that makes them ineligible for an employer-sponsored health plan. However, many individuals do not elect COBRA coverage because they can be required to pay the entire COBRA premiums up to 102% of the cost to their group health plan.
In a major shift, Subtitle F of the American Rescue Plan Act (ARPA) now covers 100% of the COBRA premiums for eligible individuals from April 1, 2021 to September 30, 2021. Specifically, ARPA applies to (1) people receiving COBRA coverage as of April 1, (2) people eligible to receive COBRA coverage and who have not yet elected to use it as of April 1, and (3) those who stopped receiving COBRA coverage but remain eligible. This ARPA provision could allow untold numbers of terminated employees to maintain health insurance that they might have otherwise lost due to its prohibitive cost.
Not only does ARPA create a promising opportunity for terminated employees to maintain their health care coverage, but it ensures that they will be informed of the premium assistance program. The COBRA provision requires that administrators of employer health plans must provide notices of premium assistance qualification within 60 days of an individual becoming eligible. Administrators must additionally describe the nature and implications of the premium assistance. ARPA requires the Department of Labor to provide model notices of the new premium assistance program by April 10.
For employees facing employment separation, the key element of this ARPA provision is that it only applies to involuntary termination or hours reduction for reasons other than gross misconduct. It is the employer who reports whether or not a terminated employee qualifies for the premium assistance, so it is essential that the characterization of the employment separation is made explicitly clear in order for a terminated employee to be eligible for the new premium assistance. The best way to accomplish this is to have clear language addressing the characterization of termination, lack of gross misconduct, and COBRA eligibility in a separation agreement. Correia & Puth represents employees facing employment separation, and in the negotiation of severance agreements. If you have concerns about termination and how it could affect your eligibility for COBRA premium assistance, please contact us today