If you reduced your workforce or your employees’ hours this past year, they may be eligible for 100% coverage of their monthly health insurance premiums at no cost to you or to them.
Under the American Rescue Plan, people who elect COBRA continuation coverage because of involuntary job loss or reduction in hours can apply for premium assistance coverage. If eligible, the government will cover 100% of their COBRA premiums through Sept. 30, 2021.
The premium will be reimbursed directly to the employer, plan administrator, or insurance company through a COBRA premium assistance credit.
Here are the steps you should follow:
1. Plans and issuers were required to notify eligible employees who had a qualifying event before April 1, 2021 about their right to COBRA premium assistance by May 31. If you haven’t done so yet, notify them immediately.
2. Plans and issuers also must notify those individuals about when their premium assistance ends, and whether they may be eligible for regular COBRA coverage or coverage under a group health plan, such as through the Health Insurance Marketplace.
3. To claim the premium assistance credit, employers should report the credit and number of individuals receiving assistance on your federal employment tax return, usually Form 941. You can reduce the deposits of federal employment taxes up to the amount of the anticipated credit, and request an advance of the amount of the anticipated credit that exceeds the federal employment tax deposits available for reduction by filing Form 7200. See the Form 7200 instructions and IRS Notice 2021-31 for more info.
Under COBRA, group health plans must provide temporary continuation of group health coverage that might otherwise end (for example, through layoffs or if an employee voluntarily leaves their job).
COBRA requires continuation coverage to be offered to covered employees, their spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain specific events. Those events include:
- A covered employee’s death,
- A covered employee’s job loss or reduction in hours for reasons other than gross misconduct,
- A covered employee’s becoming entitled to Medicare,
- A covered employee’s divorce or legal separation, and
- A child’s loss of dependent status (and therefore coverage) under the plan.
COBRA generally applies to all private-sector group health plans maintained by employers with at least 20 employees on more than 50% of its typical business days in the previous calendar year. (Part-time employees count as a fraction of a full-time employees, equal to the number of hours worked divided by the number of hours an employee must work to be considered full time.)
Following a qualifying life event, they will be notified of their eligibility for COBRA continuation coverage by your plan and may elect coverage.
Your monthly health insurance payment. COBRA premiums are often higher than what you paid before, since your employer no longer pays any part.
If you're eligible for assistance under the American Rescue Plan, the government would cover all your premiums (i.e., your usual monthly payments).
They may be eligible if the following is true between April 1, 2021 and Sept. 30, 2021:
- Their hours were reduced
- They changed from full-time to part-time status
- They took a temporary leave of absence
- They participated in a lawful labor strike
- They lost their job (unless it was voluntary or for gross misconduct)
- And they elect COBRA continuation coverage.
NOTE: They are not eligible for the premium assistance if they are eligible for other group health coverage (for example, through a new employer or spouse) or Medicare.
They can apply for premium assistance by following three simple steps:
Once processed, the premium will be reimbursed directly to the employer and they will continue to have access to their health insurance at no cost through September 30 2021.
- Check their mail for a letter from you about electing COBRA continuation coverage.
- Fill out the forms included in the letter to elect enrollment (if they haven’t already done so) and indicate that they are eligible for assistance.
- Return the forms to you as instructed in the letter.
An employee’s premium assistance can last from April 1, 2021 through September 30, 2021. However, it will end earlier if:
- They become eligible for another group health plan, such as a plan sponsored by a new employer or a spouse’s employer, or they become eligible for Medicare.
- They reach the end of their maximum COBRA continuation coverage.
- Model General Notice and COBRA Continuation Coverage Election Notice: MS Word | PDF. Also available in Spanish MS Word | PDF
- Model Notice in Connection with Extended Election Period: MS Word | PDF. Also available in Spanish MS Word | PDF
- Model Alternative Notice: MS Word | PDF. Also available in Spanish MS Word | PDF
- Model Notice of Expiration of Premium Assistance: MS Word | PDF. Also available in Spanish MS Word | PDF
- Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021: MS Word | PDF. Also available in Spanish MS Word | PDF
- Federal Register Notice