The American Rescue Plan Act (ARPA) - FAQ's About COBRA Premium Subsidies
ARPA was signed into law on March 11th, 2021 as part of the Biden Administration’s COVID Relief Plan. In addition to providing a third round of stimulus checks to qualifying Americans, ARPA also included legislation around healthcare premiums offered through the federal and state exchanges, and updates to COBRA.
Frequently Asked Questions Regarding the COBRA Subsidies:
Q. What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances for coverage that otherwise might be terminated. Qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost to the plan.
Q. Is there a difference between State and Federal COBRA?
Yes; Federal COBRA generally applies to companies with at least 20 employees for 50% of the previous calendar year. State continuation (‘Mini-COBRA’) applies to companies with less than 20 employees for 50% of the previous calendar year. Companies under state COBRA will also be subject to the COBRA regulations of the state where the company's plans are based and not the location of the employee.
Q. Have there been changes to COBRA under ARPA?
Yes; ARPA includes a provision for a COBRA continuation coverage premium subsidy of 100 percent for individuals and families who experienced an involuntary termination of employment or reduction in hours. The Act creates a new extended election period for individuals who would qualify for the subsidy if they had elected COBRA before April 1, 2021. The Act also permits individuals who would otherwise be eligible for the subsidy but who discontinued coverage before April 1, 2020 to re-elect COBRA. These changes are in effect through 9/30/2021.
Q. What COBRA subsidies are provided by the ARPA?
ARPA provides a premium subsidy for qualified beneficiaries who elect continuation coverage through COBRA, including state continuation programs. This subsidy covers the cost of COBRA premiums and applies to COBRA premiums paid for coverage periods between April 1, 2021, and September 30, 2021; Or when the qualified beneficiary becomes eligible for other group medical or Medicare coverage, whichever comes first.
Q. Does this apply to both Federal and State?
Yes, these changes apply to both Federal continuation coverage and State continuation coverage (also called Mini-Cobra).
Q. Which plans are subject to these rules?
ARPA applies to all group health plans, fully insured and self-insured, providing major medical benefits that are subject to federal or state continuation coverage requirements. This includes major medical, dental and vision. However, healthcare flexible spending arrangements (health FSAs) are not subject to these requirements. It is not clear if health reimbursement arrangements (HRAs) are subject to these provisions. It’s important to note that for Massachusetts Mini-COBRA, subsidies only apply to medical plans; dental and ancillary plans are not eligible for a subsidy.
Q. Who is eligible for a COBRA subsidy under ARPA?
A qualified beneficiary must have experienced an employer-initiated termination of their employment, or reduction of hours to benefit from this subsidy. Involuntary termination does not include termination for reason of gross misconduct.
The qualified beneficiary must also not be eligible for other group health coverage or Medicare. Employees who voluntarily terminate their employment and dependents who age off the plan are not eligible for the COBRA subsidy
- Coverage was lost due to involuntary termination of employment or reduction in hours.
- The COBRA participant is still within the COBRA eligibility period as of April 1, 2021.
- Eligible COBRA participants who do not have an election in place will have the opportunity to make an election during an Extended Election Period and will be able to take advantage of the subsidy effective April 1, 2021. This will be referred to as the “lookback period” in determining member eligibility.
- Eligible COBRA participants who have an election in place as of April 1, 2021 will be able to take advantage of the subsidy effective April 1, 2021.
- Eligible COBRA participants who become eligible for COBRA continuation coverage on or after April 1, 2021 will be eligible for the subsidy while it is in effect.
Q. How do I apply for the COBRA subsidy?
Eligible qualified beneficiaries do not need to apply for the COBRA subsidy. The COBRA subsidy should be available to them automatically. Qualified beneficiaries should receive a notice stating they will not be charged the full premium when enrolling in COBRA during the COBRA subsidy coverage period which is from April 1, 2021 through September 30, 2021. Employers should coordinate with their COBRA administrators to establish who is eligible for the ARPA COBRA subsidy. COBRA administrators do not track, and, therefore, do not know whether employer-initiated termination or reduction of hours is the reason for COBRA eligibility.
Q. What is the special COBRA election period?
The ARPA provides an additional COBRA election period for certain qualified beneficiaries. This includes:
- People who would qualify for the premium subsidy and are still within their 18-month coverage period but declined COBRA coverage previously.
- People who dropped COBRA coverage before the maximum coverage period expired.
It is important to note that if the COBRA triggering event was not ‘involuntary termination’ or ‘reduction of hours’, individuals would only be eligible for the re-enrollment in COBRA, and not the subsidy.
Q. How long is the special COBRA election period?
The election period starts on the date the qualified beneficiary receives a new COBRA election notice and lasts for 60 days, however, if an election is made within the new 60-day election period, continuation coverage will be retroactive back to April 1, 2021.
Q. Does the special COBRA election period extend the maximum COBRA coverage period?
No, it does not. The new election period does not extend the maximum coverage period for any qualified beneficiary who elects COBRA coverage under these circumstances.
Q. If COBRA is elected during the new COBRA election period; will coverage start retroactively back to initial eligibility; or for the date COBRA coverage was dropped?
No, coverage is not retroactive back to initial eligibility date or when COBRA coverage was dropped. The individual could receive continuation coverage for the remainder of their COBRA maximum duration period. However, if an election is made within the special 60 days’ election period, coverage will be retroactive back to April 1, 2021.
Q. If I paid for coverage during April 1, 2021 and September 20, 2021, will I get reimbursed?
Yes, any eligible individual that is already on COBRA due to involuntary termination or reduction of hours will be due a refund if they accidentally pay for coverage in April through September. It is uncertain who would refund the qualified beneficiary, but it is likely that the entity that obtains the tax credit for the subsidized payment will be responsible for the refund.
Q. Can I change coverage to another plan option under the special election period?
Employers have the option of allowing qualified beneficiaries to change coverage to other plan options. Typically, qualified beneficiaries must be covered by the same plan that covered them prior to the date of the qualifying event. They would only be able to change coverage if an open enrollment period occurs during their period of COBRA coverage.
If the employer allows for changing coverage, then the employer must provide qualified beneficiaries with notice and give them 90 days from the date of the notice to make a change. The qualified beneficiaries can only choose coverage that costs the same, or less than the coverage that is already in place.
Q. Is the termination of the COBRA subsidy (September 30, 2021) a qualifying event for an individual to enroll in group health plan coverage; or an individual plan in the health exchange?
Without further guidance, the end of a COBRA subsidy is not an IRS-permitted qualifying event to enroll in group health plan coverage. However, individuals are qualified to enroll in an individual plan as the end of an "employer provided" subsidy opens an SEP (Special Enrollment Period).
Q. Will HSA Insurance be sending COBRA notice updates to qualified beneficiaries?
No, HSA Insurance will not be sending updates notices.
Q. Who is required to provide the employer notices?
The notices are an obligation of the plan administrator, which is typically the employer. The employer may contract with another party, such as a COBRA vendor, to perform the duty on their behalf, but the employer is ultimately responsible for compliance. Failure to comply with the notice requirement would be considered a COBRA failure subject to penalty.
Q. Can the notices be distributed via email?
Generally, no. COBRA notices should be sent via first-class mail to the last known address of the qualified beneficiaries. Sending COBRA-related notices via email cannot be administered unless the former employee provided a personal email address; or the qualified beneficiary is still employed with a work email address but receiving COBRA due to a reduction of hours. Dependents will also need to receive these notices so sending notices to them via email may not be possible.
Q. Do participants have any notice responsibility?
Yes, if a participant becomes eligible for other group health plan coverage or Medicare, they are required to notify the plan accordingly.