COBRA Rules Have Changed. If You’ve Terminated Employees After March 2020, You Are Affected

Under the American Rescue Plan Act (ARPA) that President Biden signed into law on March 11, 2021, the federal government will pay 100 percent of COBRA insurance premiums for eligible employees who lost their jobs (and for their covered relatives) through September 2021, enabling them to stay on their company-sponsored healthcare plan.

This is federally funded, however, all businesses firing or laying off employees must administer this benefit.

What you need to know

• The 60 days to elect COBRA and 45 days subsequently to pay has been suspended

• If you had employees who were involuntarily terminated (this does not apply to those who have quit) after March 2020 who did not elect COBRA or who canceled COBRA, they may enroll or re-enroll in COBRA starting April 1, 2021, and ending 60 days after an updated COBRA notice is sent to those terminated employees.

• Employees who lost health coverage as far back as November 2019 may benefit from the subsidy, since their 18-month maximum COBRA period will not expire until the end of April 2021.

• Employers and health insurers cannot collect COBRA premiums from former plan participants eligible for the subsidy

• Employers of fully insured plans will be reimbursed through a tax credit and employers of self-insured plans will receive reimbursement through a payroll tax credit.

• You must send notices to all terminated employees, so start preparing your list. 

• Employers are obligated to send a follow-up notice out to participants whose subsidy will terminate prior to September 20, 2021, to warn them about the expiration of the subsidy

• The U.S. Department of Labor (DOL) posted model COBRA notices that can be sent to all individuals who qualify for this COBRA coverage. In addition, DOL has a set of FAQs to help employers comply with the federal COBRA premium subsidy.