The American Rescue Plan Act of 2021 (ARPA) was passed through the House and Senate this week. The bill was signed into law on March 11, 2021. While the specifics are still developing, here are 8 things to know about the COBRA subsidy that is included in the bill.
1. It’s a 100% subsidy.
While there were several iterations of the bill and subsidies, the final version includes a 100% subsidy. This will allow eligible individuals to obtain COBRA continuation coverage for their health plan without paying COBRA premiums.
2. It’s specific.
The COBRA subsidy is only available for premiums due from April 1, 2021 through September 30, 2021, referred to as the subsidy period. In order to be eligible, individuals must be in their 18-month Federal COBRA Coverage period.
3. Coverage is not automatic.
While newly eligible individuals will not need to pay premiums, they will still need to elect COBRA coverage in order to take advantage of the subsidy.
4. Employers are responsible for paying premiums, but receive a tax credit.
Employers sponsoring a group health plan will be responsible for paying health insurance carriers for the premiums. They will be reimbursed for 100% of the COBRA premiums through tax credits against certain payroll taxes.
5. New and previous qualified beneficiaries may be eligible.
The COBRA subsidy is available for individuals who are or become qualified beneficiaries as a result of involuntary termination of employment or a reduction in hours. This may include individuals who:
- become eligible for COBRA during the subsidy period
- previously elected COBRA coverage and have paid premiums for prior months
- have not elected COBRA coverage but are still eligible to elect COBRA
6. Eligible individuals will need to be notified.
Eligible individuals will need to receive an updated notification regarding their rights to COBRA and the COBRA subsidy. The Department of Labor and Department of Health and Human Services is expected to provide new model notices within 30-days of enactment of the law.
7. Subsidies apply to Group Health Plans, except FSAs.
The 100% COBRA subsidy applies to the underlying medical coverage, dental and vision plans. Participants may still be responsible for premiums if they elect coverage for an FSA (or other benefits being offered post-employment).
8. Individuals could elect to change coverage.
If an employer permits individuals to change coverage, the premium subsidy cannot exceed the cost of the coverage option the individual was in at the time of the qualifying event.
For example: Assume at the time of termination an employee was enrolled in Plan A and the premium was $500 per month. They have an opportunity to enroll in Plan B, but it costs $700 per month. The employee’s subsidy cannot exceed the original premium of $500 per month.
Join Us for a Deep Dive
We will be providing a deep dive regarding COBRA subsidies and other recent legislative actions and you’re invited! Register now to attend our Legislative Frenzy: COBRA subsidies, pandemic periods, FSA relief and more webinar on April 8, 2021.
Ivette Hernandez says
I am paying cobra insurance since November 2020.
Should I call the ex Employer to start paying April to September 2021 premium?
Jonna Reczek (Benefit Resource) says
Hi Ivette. We are waiting for details to develop and will provide guidance in the near future around actions to take.
Debbie Candeloro says
Thank you for this informative update and could not come at a better time.
db says
should i turn off my COBRA autopayment?
Jonna Reczek (Benefit Resource) says
Thanks for your comment. We are waiting for details to develop and will provide guidance in the near future around actions to take.
Robert Barden says
We need the information now in March to make decisions about switching to cobra from current health coverage. Receiving information in April may mean a missed month of cobra subsidy or a month without any insurance as previous insurance purchased instead of cobra would need to be canceled.
Jonna Reczek (Benefit Resource) says
Hi Robert. We are waiting for details to develop and will provide guidance in the near future around actions to take.
Morgan says
I am currently paying for COBRA since October 31, 2020.
I will not be at my place of residence for the month of April.
How will I get notified to elect the subsidy since I won’t be
home to to receive mail ?
Does the DOL or previous employer notify me and how ?
Thank you
Jonna Reczek (Benefit Resource) says
Hi Morgan. If you have mail forwarding services, you should receive the mail at your alternate residence in April. Your previous employer will notify you.
Shannon Murphy says
So here’s a sticky wicket:
At the time of separation, the company (of fewer than 20) had a common law employment agreement with a PEO and the employee was offered COBRA, but declined.
Shortly after that, the company switched to another PEO with an arrangement that didn’t include common law employees.
Is the employee eligible? If so, who sends the updated notification? The previous PEO, the employer, or the employer’s new PEO?
Jonna Reczek (Benefit Resource) says
Hi Shannon. ARPA directs the Secretary of Treasury to issue additional guidance on reporting tax credits, credits claimed by multiemployer plans, procedures to claim advance credits, and the possibility that third party payors (such as PEOs, CPEOs, and 3504 agents) may be able to claim the credits. Be expect additional guidance to come.
Stephen Karp says
How do I register for this cobra subsidy. I was terminated in June 2020 because of the pandemic and have been on COBRA since
Jonna Reczek (Benefit Resource) says
Hi Stephen. Details on the subsidy, including how to register, are still developing. We anticipate being able to provide guidance in the near future.