Benefits and Compensation

ARPA COBRA Subsidy 101

The American Rescue Plan Act of 2021 (ARPA) has some new rules related to the Consolidated Omnibus Budget Reconciliation Act (COBRA). Any employer that has a health plan subject to COBRA should be aware of these changes. Let’s take a look at the basics of what ARPA will implement.

COBRA
stethoscope coiled like a cobra snake

COBRA Subsidies Available April–September 2021

ARPA provides a full 100% COBRA premium subsidy for anyone who is qualified (more on that in a moment) and eligible for COBRA between April 1, 2021, and September 30, 2021. This means that anyone qualified who is already enrolled in COBRA coverage and still eligible for time during that period would be able to take advantage of that subsidy for whatever amount of time they qualify, up to the full 6 months. This subsidy is not taxable.

Note: These subsidies are only available to those who qualify (called “assistance-eligible individuals”), which includes anyone who lost coverage due to involuntary termination (for reasons other than gross misconduct) or a reduction in hours. This will not be everyone who is on COBRA, so this distinction is important.

Another important note is that the length of the subsidy does not impact the length of someone’s eligibility for COBRA coverage. If an individual’s COBRA coverage is due to expire during the subsidy period or end for another reason, it will still expire/end on time, and he or she will only get whatever subsidies were due up to that point.

Special Enrollment Options, Too

Given these new benefits on offer, ARPA also includes a provision to give those who were previously eligible to enroll in COBRA but elected not to do so in the allotted time period a second chance to enroll to be able to take advantage of the subsidy. It also allows reenrollment for anyone still eligible who previously dropped COBRA coverage.

Note: Again, these only apply to assistance-eligible individuals.

The new special enrollment period will be 60 days after receiving the notice of eligibility. They can stay enrolled through the end of their enrollment period but will have to pay premiums after September 2021 if eligible to stay enrolled beyond that time.

ARPA COBRA Subsidy Impact on Employers

The primary impact for employers is in two main areas:

  1. Communications required:
  2. The Department of Labor (DOL) will be issuing COBRA election notices within 30 days of ARPA enactment and premium subsidy expiration notices within 45 days of ARPA enactment.
  3. Plan sponsors will be required to inform those eligible about the subsidy and about the special enrollment period. Note: This only includes assistance-eligible individuals, which is not everyone who would have been eligible for COBRA.
  4. Anyone who becomes eligible for COBRA during the eligibility period will need to be informed of these provisions, as well (in addition to the other standard required notifications).
  5. Notice is also required before the subsidy ends.
  6. Responsibility for premiums in some cases:
  7. For self-insured plans, the employer will take on the premium payment and then get reimbursed later via payroll tax credits.
  8. If your organization uses an insurance provider, the insurer will be responsible for the premiums. You may need to reach out to the provider to ensure there are no issues with coverage continuation for eligible individuals, given they will not be paying their premiums during the covered period.
  9. Wait for more guidance from the Internal Revenue Service (IRS) if this applies to you.

Employers should expect the DOL notices in the coming weeks and should be prepared to implement these changes.