The past year has not been an easy one for business owners, and events related to the pandemic have sometimes prompted difficult decisions. Employees, meanwhile, don’t exactly have it easy, and no one wants to lose their health insurance during a disease outbreak.
That’s the idea behind many provisions contained with the American Rescue Plan, recently passed by Congress and signed by President Biden. One of those provisions specifically outlines a process for former employees, who have lost their group healthcare plans due to job loss, to continue their coverage via COBRA benefits.
As of April 1, all group health plans that include COBRA coverage must also offer a subsidy to cover 100 percent of COBRA premiums. This provision remains in place until September 30 for all “assistance eligible employees” along with their dependents, unless it is extended by future legislation. This rule applies to major medical, dental, and vision plans, but does not apply to health flexible spending accounts.
For employers, this rule essentially means that COBRA coverage must be paid by the employer, so long as the employee is “assistance eligible”. Assistance eligible simply means that the employee qualifies for COBRA due to involuntary termination or a reduction in hours. Those who voluntarily terminated employment are not eligible for the subsidy.
The rule also allows those who were eligible for COBRA during the past 18 months, but who did not elect the coverage, to enroll and receive the subsidy so long as they are otherwise eligible for this benefit.
How the COBRA subsidy works: Premiums will be covered by the employer or insurer, and will be reimbursed by the federal government through a payroll tax credit. The idea is to streamline the process for the insured individual and their dependents, allowing a simple enrollment process with no payment of premium required of them. However, employers who will suddenly become responsible for advancing these premiums should begin analyzing their options and planning for this expense now.
Give us a call to discuss your situation as an employer, and we can help to answer your questions about the COBRA subsidies, payroll tax credit, and other related issues.