COBRA Subsidies Under ‘ARPA’

(March 16, 2021)

Under the newly enacted America Rescue Plan Act of 2021 (ARPA), COBRA premiums for “assistance eligible individuals” will be 100% subsidized for the period beginning April 1 through September 30, 2021 (“the subsidy period”).

The phrase “assistance eligible individuals” is generally defined to include any employee or dependent who loses coverage under a group health plan (including both self-funded and insured plans) due to an involuntary termination of employment or because of an involuntary reduction of hours. Employees who left work voluntarily are not considered assistant eligible individuals.

The ARPA also includes a special election period for individuals as follows:

  • For any individual who did not initially elect COBRA continuation coverage but who would otherwise have been eligible for the subsidy, and
  • For any individual who elected COBRA continuation coverage but discontinued it prior to April 1, 2021.

If an assistance eligible individual becomes eligible for other health plan coverage during the subsidy period, or reaches the COBRA maximum period, then the COBRA subsidy under ARPA will terminate. Assistance eligible employees can face a fine of up to $250 if they fail to report to the plan administrator when they become eligible for coverage under another health care plan.

The ARPA provisions do not operate to increase the COBRA coverage period (either 18, 24 or 36months), but provide for subsidized premiums for the 6-months during the subsidy period. The premiums will be paid by the employer, but may be offset later as a refundable tax credit.

Coordination of the COBRA notice requirements under ARPA will be a substantial compliance issue for employers and plan administrators. The ARPA provides that additional guidance will be forthcoming and hopefully, whatever guidance is issued will clarify these coordination questions. It is anticipated that Model Notices will be issued by the Department of Labor soon.

In the meantime, plan sponsors and employers who act as plan administrators are encouraged to seek guidance from counsel and any of the attorneys at Wimberly Lawson will be pleased to assist in that regard.