Legislation Update: American Rescue Plan Act and Health Insurance
President Biden signed the American Rescue Plan Act of 2021 (ARPA) on March 11th of this year. While this legislation covers a wide array of topics, below are some updates regarding our world of health insurance.
6 Months of COBRA Subsidies
The American Rescue Plan Act will provide full COBRA subsidies from April 1, 2021 through September 30, 2021. These subsidies will cover 100% of the cost of COBRA during this time for Assistance Eligible Individuals (AEIs).
This legislation applies to federal COBRA as well as any State program that provides comparable continuation coverage, like Cal-COBRA in California. Please note that federal COBRA and state continuation COBRA may have different rules.
How it's paid
For employers subject to Federal COBRA, the employer will pay the COBRA premiums and then reimburses these expenses through a quarterly tax credit against their payroll taxes. Employers can claim a tax rebate should the cost of the COBRA premiums exceed their payroll taxes.
For employers subject to state continuation programs (like CalCOBRA), the insurer will pay the COBRA premiums and then claim the tax credit.
Eligibility
The COBRA premium assistance is available to Assistance Eligible Individuals (AEIs). AEIs are COBRA qualified beneficiaries that had a lost coverage due to involuntary termination or reduction in hours.
The subsidies are available for the 6-month period of April 1, 2021 through September 30, 2021. They will end sooner than September 30, 2021 if:
- The individual's COBRA coverage is exhausted
- The individual becomes eligible for group health plan coverage or Medicare
Individuals must notify their plan if they become eligible for another plan, otherwise they mace a penalty of $250 or 110% of the subsidy.
Employer Requirements
Employers (or potentially insurers for Cal-COBRA) will be required to provide notices to eligible individuals regarding these COBRA subsidies. The Department of Labor provided model notices which can be seen here.
For more detailed information on how B&P carriers are handling ARPA COBRA Subsidy requirements, please visit this webpage.
Increase in Dependent Care FSA Amount
Employers may elect to increase the annual contribution limit on a Dependent Care FSA from $5,000 to $10,500 (and from $2,500 to $5,250 for married individuals filing separately) for the 2021 calendar year. Employers can retroactively amend their plans.
Individual Insurance
The bill also provides relief to individuals and families by:
- Removing income limits so more will be eligible for assistance.
- Increasing subsidies by capping the cost of premiums at 8.5% of household income.
- Providing funding to encourages states to expand Medicaid if they haven't already done so.
Resources
For questions, please contact your B&P Sales Rep - 888.722.3373.
The information contained herein is for informational purposes only and is not intended as legal or tax advice.