Labor & Employment Alert: Federal "American Rescue Plan" Creates New COBRA Obligations for Employers

The focus of the American Rescue Plan may have been on issuing cash subsidies to families across America, but Section 9501 of this bill created new obligations for employers who offer health insurance to employees. The concept is that, for a 6-month period, effective beginning April 1, 2021, terminated/reduced hour employees who have lost their health insurance coverage can, under COBRA, continue to receive benefits – but, unlike standard COBRA, the employee is not required to pay the premium. Employers are expected to cover the premium – which is then “reimbursed” by way of a tax credit.

This benefit applies in several scenarios:

1. Someone who is terminated between April 1 and September 30 who, under normal rules, would be eligible for COBRA continuation, now can continue it at no premium;
2. Someone who was terminated due to the virus, say a year ago, who would have been eligible under COBRA at the time, can now get this benefit during this 6-month period starting April

Note:  even if the individual rejected COBRA at the time [because he/she couldn’t afford it, for example], he/she can now pick it up under this program.

Note:  even if he/she picked it up at the time, and dropped it, he/she can “re-enlist.”

However, this law does not alter/extend the length of eligibility for the COBRA rights, normally 18 months. So, if the individual has been out of work for, say, 16 months, as of April 1, he/she can only participate for 2 more months under the program.

Also¸ there is nothing retroactive about this benefit – if someone has been paying his monthly premiums for the last year under COBRA, he can continue after April 1 without paying, but the payments he already made are not reimbursable.

3. If the employer is too small to be covered under COBRA, but is, nevertheless, covered by Ohio’s rule requiring 12 months of extended coverage, an employee can still participate in this program, to the extent he/she is eligible under Ohio’s rules.

There is an additional burden now on employers to assure that employees are notified of this program, in four circumstances:

1. Someone who is COBRA-eligible [or eligible under State law] and is terminated post-April 1, is entitled to a special notice informing him/her of his/her rights: “Model ARP General Notice and COBRA Continuation Coverage Election Notice (For use by group health plans for qualified beneficiaries who have qualifying events occurring from April 1, 2021 through September 30, 2021)”. That Notice is available at:

2. Someone who was COBRA-eligible and was terminated pre-April 1, is entitled to a special notice informing him/her of his/her rights: “Model COBRA Continuation Coverage Notice in Connection with Extended Election Periods (For use by group health plans for qualified beneficiaries currently enrolled in COBRA continuation coverage, due to a reduction in hours or involuntary termination (Assistance Eligible Individuals), as well as those who would currently be Assistance Eligible Individuals if they had elected and/or maintained COBRA continuation coverage).” That Notice is available at:

3. Someone who was eligible under Ohio’s mini-COBRA law and was terminated pre-April 1, is entitled to a special notice informing him of his rights: “Model Alternative Notice of ARP Continuation Coverage Election Notice (For use by insured coverage subject to state continuation requirements between April 1, 2021 and September 30, 2021)”. That Notice is available at:

4. People who participate in this program but whose benefits are about to expire are entitled to a specific notice that the financial assistance is about to end: “Model Notice of Expiration of Period of Premium Assistance(For use by group health plans to Assistance Eligible Individuals 15-45 days before their premium assistance expires)”. That Notice is available at:

https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/cobra/premium-subsidy/notice-of-premium-assistance-expiration-premium.pdf