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ARPA's 100% COBRA Subsidy

Updated: Apr 8, 2021

Under the American Rescue Plan Act ("ARPA"), insurers and employers who are subject to COBRA continuation requirements are required to provide "assistance eligible individuals" with a 100% subsidy for COBRA premiums from April 1, 2021 through September 30, 2021.


An "assistance eligible individual" is defined under ARPA as a qualified beneficiary -

  1. whose COBRA qualifying event is an involuntary termination of employment or reduction of hours;

  2. who is not otherwise eligible for Medicare or other group health plan coverage; and

  3. who actually elects COBRA coverage.

An "assistance eligible individual" can be someone who first becomes eligible on or after April 1, 2021, but it also includes someone who had a COBRA qualifying event before April 1, 2021, and whose maximum COBRA coverage period overlaps with the April 1, 2021 through September 30, 2021 period.


In addition, if an "assistance eligible individual" was entitled to COBRA coverage previously, but either never elected coverage or discontinued coverage, then a new special election opportunity begins on April 1, 2021 and ends 60 days after the newly required notice is provided.


Several new notices are required under ARPA's COBRA subsidy. First, group health plans must provide COBRA subsidy information to qualified beneficiaries who first become eligible to elect COBRA during the period from April 1, 2021 through September 30, 2021. The Department of Labor will be issuing a new model notice within 30 days of ARPA's enactment.


Second, individuals who became entitled to COBRA prior to the April 1, 2021 through September 30, 2021 period, but whose coverage period overlaps with the April 1, 2021 through September 30, 2021 period, must receive a new notice about their extended election period rights by May 31, 2021. Again, the Department of Labor will be issuing a model notice within 30 days of ARPA's enactment.


Third, unless an individual's COBRA subsidy is ending because they have become eligible for coverage under another group health plan or Medicare, group health plans must notify "assistance eligible individuals" of their COBRA subsidy's expiration no earlier than 45, and no less than 15, days prior to the expiration date. The Department of Labor will be issuing a model notice within 45 days of ARPA's enactment.


In order to pay for the subsidy, employers will be required to cover the entire COBRA premium, including the 2% administrative fee, but can offset their regular quarterly Medicare employment tax obligation for each "assistance eligible individual."


***April 8, 2021 Update*** The Department of Labor recently issued FAQs regarding the COBRA subsidy, as well as model notices. The FAQs and model notices are available here.


Employers are advised to consult with their legal counsel regarding specific questions or concerns. If you have any questions, or need assistance, please feel free to contact Jeremy D. Iosue or Jason T. Hartzell at (216) 651-0451.

This Employment Law Alert may provide an overview of specific federal and/or state laws and regulations. It is not intended to be, and should not be construed as, legal advice for any particular situation or individual.


Copyright © 2021 Stefanik Iosue & Associates, LLC. All rights reserved.

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