ARPA – Cobra Subsidy

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA).

For Mindful Insurance Solutions Clients

Four our clients that have COBRA services through our TPA and for clients that the insurance carrier is required to manager COBRA, notices will be sent out by those providers as required by this legislation.  Employers do not need to send out notices.

Time Frame of ARPA

April 1, 2021 To September 30, 2021

Who Qualifies – Current COBRA Participants

Importantly, the ARPA subsidy is available only to those whose initial COBRA period ends (or would have ended if COBRA had been elected/did not lapse) either during or after this six-month period.

New Election Period For COBRA

The termination of employment or reduction of hours may have occurred prior to the effective date of ARPA. A new 60-day election period is created for individuals who had an involuntary termination of employment or reduction in hours within the last 18 months and did not timely elect COBRA or dropped COBRA coverage. The election period begins on the date that the individual receives the new COBRA notice.

How Does Employer Get Reimbursed

100% of the COBRA premium is paid by the employer, health plan, or insurer and the premium expense is reimbursed by the federal government through a refundable FICA tax credit. For an insured or self-insured plan, the employer applies for the tax credit; however, a multiemployer plan will apply direct for the tax credit.

Who is Eligible

The subsidy is available for both assistance eligible individuals as well as their dependents electing COBRA, but is not available for anyone who voluntarily ends their employment. The subsidy will end on the earliest of (1) the expiration of the assistance eligible individual’s maximum 18-month COBRA period, (2) the individual’s eligibility for another group health plan or Medicare, or (3) September 30, 2021 (when the temporary subsidy under ARPA ends).

Notifications

An employer may elect to permit eligible persons to change their election to other plan options that have the same or lower cost premiums. Employers must update COBRA notices previously sent to individuals eligible for the subsidy to describe the subsidy and the ability to elect different coverage (if permitted by the employer) and issue extended COBRA election notices to eligible individuals entitled to elect COBRA prior to April 1, 2021 by no later than May 31, 2021. Failure to issue these notices will be treated as a failure of COBRA’s notice requirements. ARPA directs the Department of Labor to publish model notices for employers to utilize for the COBRA subsidy by April 11, 2021.

Effective Date: April 1, 2021

Action Steps:

1. Identify COBRA qualified beneficiaries who are assistance eligible individuals;

1. Reach out to “recently” terminated employees who did not elect COBRA coverage but who are now eligible for subsidized coverage; and
2. Update COBRA notices and prepare notices addressing the new requirements (as noted, the DOL model is due by April 11, 2021).