American Rescue Plan Act of 2021 Health Benefits Provisions

The American Rescue Plan Act of 2021 is the latest federal COVID-19 relief bill signed into law on March 11, 2021. The bill provides relief in many ways, and also includes several health benefits provisions, which you can find a summary of below.

COBRA Premium Subsidies.  The Act includes COBRA subsidy provisions that aim to make health insurance accessible and affordable by providing a six-month subsidy period from April 1, 2021 to September 30, 2021. During this time period, certain assistance eligible individuals (AEI) may qualify for a 100% subsidy for COBRA coverage. An AEI is a COBRA qualified beneficiary that is eligible for and elects COBRA coverage due to a qualifying event of involuntary termination of employment or a reduction in hours during the six-month subsidy period previously mentioned. Employees who terminated their employment voluntarily are not eligible. All other COBRA qualifying events do not qualify for the Act’s COBRA subsidy. The subsidy is available for any period of coverage during the previously mentioned period. Eligibility may end earlier if the AEI’s maximum coverage period ends before September 30, 2021.

Election Period Extended. Individuals who do not have a COBRA election in effect on April 1, 2021 but would be an AEI if they did, are eligible for the subsidy. Additionally, individuals who elected COBRA coverage, but discontinued it prior to April 1, 2021 are eligible if they would otherwise be an AEI and are still within their maximum period of coverage. Qualified individuals may make a COBRA election during the period beginning on April 1, 2021 and ending 60 days after they are provided notification of the extended election period. Coverage will be provided on a prospective basis if coverage is elected. As such, there may be a lapse in coverage between the original COBRA event date and the extended election date. Premiums will not be required to be paid back to take advantage of this second election opportunity. Employers are not required to allow AEIs to elect a different coverage option.

Tax Credit.  A quarterly tax credit against the Medicare payroll tax equal to the premium amounts not paid by AEIs is available for employers. The credit may be advanced and is refundable. This means that an employer could claim a refund if the subsidy paid exceeds the amount of taxes due.

Notice Requirements. Group health plans are required to notify AEIs of the subsidy and option to enroll in different coverage, the extended election period for COBRA coverage, and a notice of the expiration of the subsidy in a timely fashion. The DOL is set to issue model notices that can be used to relay this information to eligible individuals.

In addition to the changes mentioned above, the Family and Sick Leave credits, originally enacted by the Families First Coronavirus Response Act (FFCRA), have been extended until September 30, 2021. These credits are fully refundable against payroll taxes that compensate employers and self-employed individuals for COVID-19 related paid sick leave and family and medical leave. The limit on the credit has been increased to $12,000. The credits will apply for leave that is due to a COVID-19 vaccination. The limitation on the total number of days taken into account for paid sick leave will reset after March 31, 2021, and the credits have been expanded to allow 501(c)(1) governmental organizations to take them. The number of days a self-employed individual can take into account in calculating their qualified leave amount has increased from 50 days to 60 days. 

The Baldwin team is staying up-to-date on the latest legislation and updates as they happen, and we are committed to keeping you informed. If you have any questions or if you need assistance, do not hesitate to reach out.