On Thursday, March 11, President Biden signed the American Rescue Plan Act (ARPA) of 2021. Among other features, ARPA provides full COBRA subsidies under specific circumstances and creates significant additional COBRA enrollment eligibility. The following is a list of common ARPA COBRA subsidy frequently asked questions (FAQs).
This is not intended to be legal advice. Please contact your benefits counsel if you need additional guidance.
ARPA COBRA Subsidy FAQs
Are all COBRA-standard Qualifying Events (QEs) eligible for the ARPA Subsidy?
The ARPA Subsidy applies only to coverage for Assistance Eligible Individuals (AEI). To qualify as an AEI under ARPA, the COBRA participant must meet ALL of the following:
- The QE was either Involuntary Termination, or Reduction in Hours. (None of the other COBRA-qualified QEs are eligible for the ARPA Subsidy.)
- The reduction in hours does not have to have been involuntary for the individual to qualify
- A person whose employment was terminated due to gross misconduct is not eligible for premium assistance
- The QB is not eligible for Medicare or any other medical coverage, save for excepted benefits such as dental and vision.
- The QB is enrolled in COBRA as of April 1, 2021 or elects COBRA between April 1 and September 30, 2021 under the special enrollment period created by ARPA. (AEIs can elect COBRA during the special enrollment period even if they had previously elected COBRA and then discontinued coverage or allowed it to lapse.)
Does the QE have to be COVID-related to qualify for the ARPA Subsidy?
No, the QE does not have to be COVID-related, but it must be either an Involuntary Termination or a Reduction in Hours. No other QEs are eligible.
Are the dependents of an AEI also eligible for the ARPA Subsidy?
Yes. Coverage for a QB dependent associated with an AEI is also eligible for the ARPA Subsidy.
Does the ARPA Subsidy include the 2% administrative fee?
Yes. The ARPA subsidy covers the full amount the participant normally would have paid for COBRA coverage, including the 2% fee.
How long does the COBRA premium assistance last?
Premium assistance can last from April 1, 2021 through September 30, 2021. The subsidy could end earlier if:
- AEI becomes eligible for another group health plan, such as a plan sponsored by a new employer or spouse’s employer (does not include excepted benefits, QSEHRA, or health FSA)
- AEI becomes eligible for Medicare
- AEI reaches the end of their maximum COBRA continuation coverage period
What happens if a person is found to be ineligible for the COBRA subsidy after receiving assistance?
AEIs who falsify their eligibility for other coverages may be subject to fines, the greater of $250 or 110% of the premium subsidy.
Can an AEI with an individual health plan receive subsidized coverage?
AEIs with individual coverage, either through a health insurance marketplace or Medicaid, are eligible for subsidized coverage. However, those who elect to enroll in COBRA continuation coverage with premium assistance will no longer be eligible for a premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit for their health coverage during that period.
How is the government paying the ARPA Subsidy?
COBRA premiums are “advanced” by the employer (or in some cases, by the insurance carrier) who is then reimbursed by the Federal government through a refundable FICA tax credit.
Does the ARPA subsidy apply only to medical coverage? Are other plan types eligible?
The ARPA subsidy applies to benefits provided under group health plans that provide medical care, including the 2% administrative fee. FSAs are not eligible.
Is there any difference in who receives the ARPA subsidy credit based on the type of employer plan, e.g. whether a Fully-Insured employer plan, Self-Funded employer plan, or State Continuation?
For Fully-Insured and Self-Funded plans under Federal COBRA, the sponsoring employer will receive the ARPA Subsidy credit.
For State Continuation, the insurance carrier may receive the ARPA Subsidy credit. Further guidance from DOL and the Internal Revenue Service (IRS) would be helpful.
How are COBRA enrollment periods affected? Can someone who was previously COBRA-eligible elect after April 1?
ARPA creates a special enrollment period for AEIs that extends from April 1, 2021, until 60 days after the date on which the AEI received written notification of eligibility to elect coverage during the special enrollment period.
Whether newly qualified, previously eligible but did not elect at the time, or previously elected but later discontinued coverage, AEIs not enrolled in COBRA as of April 1 can elect coverage during a special enrollment period that begins April 1 and ends 60 days after the date on which the AEI received written notification of the special enrollment period.
AEIs who elect COBRA during the special enrollment period do not have to pay “back premiums” to bring coverage up to date. As a result, they receive no coverage for the prior, non-enrolled period. Their coverage begins on enrollment (April 1 or later) and the ARPA Subsidy pays the premiums for it until either September 30, 2021, or coverage ends, whichever comes first.
Electing non-continuous COBRA during the special enrollment period does not affect the timeline of the AEI’s 18-month maximum coverage eligibility, which tolls from the original QE date.
Does the EBSA extension apply to ARPA COBRA subsidies?
The extensions under the Joint Notice and EBSA Disaster Relief Notice 2021-01 do not apply to the notices or elections related to COBRA premium assistance available under ARPA.
For additional information about EBSA Extension Notices (COVID-19 Tolling Periods), click here.
Editor’s Note: ARPA allowed a full COBRA subsidy until September 30, 2021 which has now passed. President Biden is implementing a strategy called “Path out of the Pandemic” to recover from the financial and economic toll this health issue has created. Further, the administration is also working on a “Build Back Better” agenda to create jobs, cut taxes and lower costs to continue with recovery efforts.
As these efforts continue, it’s important to stay advised and educated on how these programs will assist employers and employees. For business owners who need help, a Third-Party Administrator may be a helpful option.
DataPath, Inc. creates cloud-based COBRA administration solutions for third party benefits administrators.