In March 2021 the American Rescue Plan Act of 2021 (ARPA) was signed into law with COBRA subsidy provisions. ARPA created a 6-month subsidy period – April 1, 2021 to September 30, 2021 – during which certain assistance eligible individuals (AEI) may receive fully subsidized COBRA coverage.
An AEI is a qualified beneficiary who is eligible for COBRA coverage between April 1, 2021 and September 30, 2021 due to an involuntary termination of employment or reduction in qualifying hours, if the AEI elects such coverage. A qualifying AEI would not pay COBRA premiums during the subsidy period. The subsidy period does not extend the maximum COBRA coverage period; ARPA simply suspends the AEI’s obligation to pay for COBRA for up to 6 months.
If an AEI did not elect COBRA coverage previously, or timely elected but discontinued coverage before April 1, 2021, the AEI is entitled to the subsidy if he/she makes an election within a new 60-day Special COBRA Election Period under ARPA.
All group health plans that are subject to COBRA, except health flexible spending accounts, must provide this subsidized coverage. Providing coverage is an employer requirement, and employers will need to collect the subsidy from the federal government. Employers will pay for their AEIs’ COBRA coverage and be reimbursed through credits against certain payroll taxes.
In early April, HMAA notified applicable employer groups of the subsidy and included a list of potential AEIs. HMAA will send notices to affected individuals prior to the deadline of May 31, 2021. Employers that self-administer their company’s COBRA coverage will be responsible for sending notices to their affected individuals.
For more information about ARPA, you may refer to www.whitehouse.gov/american-rescue-plan. Due to the fluidity and complexity of the requirements, please consult with your legal or other advisor as needed.
