The American Rescue Plan Act of 2021 (ARPA) includes a provision to help unemployed workers by authorizing a 100% subsidy of COBRA health insurance premiums through September 30, 2021. The ARPA was signed into law by President Biden on March 11, 2021.

Under the ARPA, employers would receive the subsidy through a payroll tax credit against their quarterly taxes. Employees who lost their jobs due to the pandemic and their covered relatives would be allowed to remain on their employer-sponsored health plans for a six-month period beginning April 1, 2021, through September 30, 2021. The subsidy is not available to employees who voluntarily quit their jobs.

Employers would also be allowed to give laid-off employees an election period of up to 90 days to enroll in a different group health plan provided by their employer. Alternative coverage premiums cannot be higher than the employee’s current plan premiums.

An eligible unemployed worker who has not elected COBRA coverage by April 1 may elect coverage during the enrollment period beginning April 1, 2021, and ending 60 days after a COBRA notification has been delivered. This also applies to unemployed workers that elected but then discontinued COBRA coverage.

The ARPA would require the amendment of COBRA notice forms by employers to include a separate document with the following information:

  • The forms necessary for establishing eligibility for COBRA premium assistance.
  • The name, address and phone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with premium assistance.
  • A description of the extended election period provided by the legislation.
  • A description of the option to enroll in different coverage, if adopted by the employer.

Model notices from the federal government would be required within 30 days of the enactment of this legislation. In addition, employers will be required to notify individuals if their subsidy will end prior to September 30, 2021, unless the subsidy is ending because the individual is eligible for other coverage.