How the American Rescue Plan Act of 2021 Affects COBRA

Employer Responsibility Regarding Cobra

The American Rescue Plan Act of 2021 affects COBRA significantly, which is something many employers need to know.

Under this act, the Department of Labor (DOL) published guidance for continued COBRA coverage. In fact, employers must provide 100% of the employee’s COBRA cost from April 1, 2021 through September 30, 2021.

What Is COBRA?

COBRA stands for Consolidated Omnibus Budget Reconciliation Act. COBRA is a temporary insurance premium for employees that have been terminated, laid off or with reduced work hours. COBRA rules are under ERISA (Employment Retirement Income Security Act) or state and local laws that require continuation of health insurance. Private sector companies providing group health plans must offer COBRA coverage when the company terminates or reduces the hours of an employee. It does not apply to employees who voluntarily quit the job or who voluntarily reduce their own hours. Also, it does not cover workers who are already covered by Medicare or a different health plan offered by a spouse’s employer or new employer.

Under normal circumstances, when employers offer COBRA, they can require the worker to pay the full cost of coverage and administrative cost, totaling 102%.

Notices the Employer Must Provide Based on the American Rescue Act

Employers with group health plans and group health providers must issue the following:

  • General notification to all qualified beneficiaries who experienced involuntary termination or hours reduction between April 1, 2021 and September 30, 2021
  • Notification of the extended COBRA to any worker eligible for assistance from April 1, 2021 to September 30, 2021
  • Notice of expiration of periods and premium assistance between 15 to 45 days prior to the period expiration date.

Do You Have Questions about How the American Plan Rescue Act of 2021 Affects Cobra?

Stephen D. Hans & Associates, P.C. can provide you with experienced legal guidance. We are glad to answer your questions and explain how the law applies based on your circumstances. Call (718) 275-6500 to arrange an appointment.


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