COBRA Subsidy
On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA). As part of the ARPA, several provisions were included that relate to the continuation of insurance benefits, known as COBRA (Consolidated Omnibus Budget Reconciliation Act). Specifically:
- There is a 100% Medical, Dental and Vision (not FSA) premium subsidy for those electing COBRA, meaning eligible participants will not pay COBRA premiums for those coverages
- The COBRA Subsidy Period is up to a 6-month period, defined as when COBRA premiums are due for coverage from April 1 through September 30, 2021
- Although subsidy-eligible COBRA participants will not pay premiums during the previously defined Subsidy Period, the employers who sponsor the group plan will remit premium to the insurance carriers, and then be reimbursed by claiming a credit against Medicare payroll taxes
- Eligibility is limited to those who are in their 18-month Federal COBRA Coverage period due to involuntarily loss of coverage from termination or a reduction of hours, for reasons other than the employee’s gross misconduct
- Eligibility applies when these scenarios are within the Subsidy Period:
- Became eligible during the Subsidy Period
- Previously elected COBRA coverage and paid premiums for prior months
- Have not elected COBRA coverage but are still eligible to elect COBRA
- Eligibility ends when you are eligible for Medicare or other non-Marketplace health coverage, get a new job that offers health coverage, or can be added to your spouse’s coverage
- The subsidy does not extend COBRA coverage, as coverage will still expire 18 months after coverage was lost, even if that is in the middle of the Subsidy Period
- Those who did not initially elect COBRA or who let their COBRA coverage lapse can now elect COBRA
- New COBRA Model Notices are expected by mid-May, and employers must send this new notice to subsidy-eligible COBRA participants
- A new election period will begin starting April 1 and end 60 days after the new notice of extended election period is provided
- Employers will need to determine which employees lost coverage on or after November 1, 2019 (18 months prior to the start of the Subsidy Period), due to an involuntary termination of employment or reduction in hours
- If employers allow the COBRA participant to switch coverage they still can, but the premium subsidy cannot exceed the cost of the coverage option the individual was in at the time of the qualifying event
- There are no income thresholds for the subsidy, and the subsidy is tax-free
It is advised to consult with your COBRA Administrator for more details on the implementation of this new COBRA benefit.
More information can be found at:
https://www.congress.gov/bill/117th-congress/house-bill/1319