3/10/2021 1:17 PM CT: UPDATE: The House of Representatives has passed the Senate amended bill which will now head to President Biden’s desk for signature
Over the weekend the Senate narrowly voted to pass the latest $1.9T Covid-19 relief bill, titled American Rescue Plan Act of 2021. The House is anticipated to vote and pass the bill as soon as this Tuesday (March 9th) before heading to President Biden’s desk for signature. The bill contains several health insurance-related provisions that are likely to become law in the coming days.
Simpara is committed to keeping our clients and stakeholders informed and updated in a timely manner and we will continue to provide updates as more information is learned. At this time, we have isolated five items in the bill that will impact employers.
COBRA SUBSIDIES
UNEMPLOYMENT BENEFITS
ACA SUBSIDY EXPANSIONS
FFCRA TAX CREDIT EXTENSIONS
RESTAURANT ACT
COBRA
Likely the single greatest regulation impacting employer-sponsored health plans is a provision which will provide for a 100% subsidy of COBRA premiums from now until September 30, 2021. COBRA applies to firms with 20 or more workers. When the qualifying event is termination of employment, individuals are eligible for up to 18 months of COBRA continuation coverage.
For most people, particularly following job loss, the cost of COBRA continuation coverage is prohibitively expensive. Individuals must pay the total cost of the group health coverage (employee and employer share) plus a 2 percent administrative fee. On average, the total annual cost of employer-sponsored health coverage offered by firms of 20 or more in 2019 was $7,012 for single coverage and $20,599 for family coverage.
At several times in the past, Congress provided for partial subsidy of COBRA premiums for displaced workers. The American Recovery and Reinvestment Act of 2009 (ARRA) provided COBRA premium subsidies of 65% to help unemployed workers afford to continue enrollment in health coverage offered by their former employer. The ARRA COBRA subsidy was available to eligible individuals for up to 9 months initially; the eligibility period was later increased to up to 15 months. Eligible individuals were required to pay no more than 35% of COBRA premiums. Their former employers paid the other 65%, which was reimbursed through a credit against their payroll tax liability.
We expect the roll out to be similar to ARRA however, many logistical questions remain unknown at this time. What is unclear is how individuals who elect COBRA will be treated come October 1, 2021, assuming no extension, when their COBRA subsidy ends. Given that this date is outside of the annual open enrollment period for the health insurance exchanges, losing the subsidy could pose significant financial hardship for those who remain unemployed after this date.
UNEMPLOYMENT BENEFITS
The Senate bill extends unemployment programs through early September, including the $300-per-week federal supplement provided in the last stimulus plan passed in December.
The Senate bill also includes a provision intended to avert surprise tax bills for people who lost jobs, waiving federal income taxes for the first $10,200 of unemployment benefits received in 2020 for households earning under $150,000.
ACA EXPASNION
The American Rescue Plan Act includes the single largest expansion of the Affordable Care Act since its initial passage. The bill includes $20 billion in grants to states that set up their own exchanges, additional subsidies for those purchasing coverage through the exchanges, and provision for displaced workers to qualify for subsidized health insurance.
For those earning >400% of FPL, they will be eligible for premium subsidies if the cost of health insurance exceeds 8.5% of their wages
For displaced workers who are earning <133% of FPL, they will be considered at the 133% threshold to enable them to receive subsidies to purchase health insurance through the exchanges
FAMILIES FIRST CORONAVIRUS RESPONSE ACT (FFCRA)
The federal Families First Coronavirus Response Act (FFCRA) expired on December 31, 2020 – and with it, covered employers’ obligation to provide emergency paid sick leave and emergency family and medical leave. Shortly before the end of the year, Congress extended the tax credit for employers who voluntarily continued to provide such paid leave through March 31, 2021. This bill extends the tax credits available for employers who voluntarily provide FFCRA leave from March 31, 2021 to September 30, 2021.
The tax credits are available for paid sick leave and paid family leave for the additional following qualifying reasons:
The employee is obtaining immunization (vaccination) related to COVID-19
The employee is recovering from any injury, disability, illness, or condition related to such vaccination.
Adds non-discrimination rules to provide that no tax credit is available if the employer, in determining availability of the paid leave, discriminates against highly compensated employees, full-time employees, or employees on the basis of tenure with the employer.
This provision appears designed to compel employers who make the decision to voluntarily provide leave do so in a uniform manner, without discriminating against certain categories of workers.
RESTAURANT ACT
The restaurant act is headed for passage this week and is included in the American Rescue Plan Act of 2021. Major provisions include:
Government-funded grants with a maximum of $10 million per restaurant group or $5 million per individual restaurant location.
Eligible businesses include foodservice and drinking establishments like restaurants, bars, caterers, breweries, taprooms, and tasting rooms that are not part of an affiliated restaurant group with more than 20 locations. Participants cannot be publicly traded and there are limits on private equity firms. Participants also cannot currently be an applicant for the Shuttered Venues Operators grant program.
Grants can be spent on payroll and benefits up to $100,000 a year, mortgage, rent, utilities, maintenance, supplies (including PPE and cleaning products), food and beverages, supplier costs, operational expenses, and paid sick leave.
The grants can be taken alongside the two rounds of PPP, EIDL, and the Employee Retention Tax Credits, though any PPP loans already received will be subtracted from the eligible grant total for any individual business.
