On Thursday, March 11, President Biden signed the American Rescue Plan Act (ARPA) of 2021. In addition to other features, ARPA provides full COBRA subsidies under specific circumstances and creates significant additional COBRA enrollment eligibility rules. The following is a list of common ARPA COBRA subsidy frequently asked questions (FAQs).
This blog is not intended to be used as legal advice. Please contact your qualified benefits counsel if you need further clarification.
ARPA and COBRA Subsidy FAQs
Are all COBRA-standard Qualifying Events (QEs) eligible for the ARPA Subsidy?
The ARPA COBRA Subsidy applies only to coverage for Assistance Eligible Individuals (AEI). To qualify as an AEI under ARPA, the COBRA participant must meet ALL of the following:
- The QE was either Involuntary Termination or Reduction in Hours. (None of the other COBRA-qualified QEs are eligible for the ARPA Subsidy.)
- The Qualifying Beneficiary (QB) is not eligible for Medicare or any other medical coverage, save for excepted benefits such as dental and vision.
- The QB is enrolled in COBRA as of April 1, 2021 or elects COBRA between April 1 and September 30, 2021 under the special enrollment period created by ARPA. (AEIs can elect COBRA during the special enrollment period even if they had previously elected COBRA and then discontinued coverage or allowed it to lapse.)
Does the QE have to be COVID-related to qualify for the ARPA Subsidy?
No, the QE does not have to be COVID-related, but it must be either an Involuntary Termination or a Reduction in Hours. No other QEs are eligible.
Are the dependents of an AEI also eligible for the ARPA Subsidy?
Yes. Coverage for a QB dependent associated with an AEI is also eligible for the ARPA Subsidy.
Does the ARPA Subsidy include the 2% administrative fee?
Yes. The ARPA subsidy covers the full amount the participant normally would have paid for COBRA coverage, including the 2% fee.
How is the government paying the ARPA Subsidy?
COBRA premiums are “advanced” by the employer (or in some cases, by the insurance carrier) who is then reimbursed by the Federal government through a refundable FICA tax credit.
Does the ARPA subsidy apply only to medical coverage? Are other plan types eligible?
The ARPA subsidy applies to benefits provided under group health plans that provide medical care, including the 2% administrative fee. FSAs are not eligible.
Is there any difference in who receives the ARPA subsidy credit based on the type of employer plan, e.g. whether a Fully-Insured employer plan, Self-Funded employer plan, or State Continuation?
For Fully-Insured and Self-Funded plans under Federal COBRA, the sponsoring employer will receive the ARPA Subsidy credit.
For State Continuation, the insurance carrier may receive the ARPA Subsidy credit. Further guidance from DOL and the Internal Revenue Service (IRS) would be helpful.
How are COBRA enrollment periods affected? Can someone who was previously COBRA-eligible elect after April 1?
ARPA creates a special enrollment period for AEIs that extends from April 1, 2021, until 60 days after the date on which the AEI received written notification of eligibility to elect coverage during the special enrollment period.
Whether newly qualified, previously eligible but did not elect at the time, or previously elected but later discontinued coverage, AEIs not enrolled in COBRA as of April 1 can elect coverage during a special enrollment period that begins April 1 and ends 60 days after the date on which the AEI received written notification of the special enrollment period.
AEIs who elect COBRA during the special enrollment period do not have to pay “back premiums” to bring coverage up to date. As a result, they receive no coverage for the prior, non-enrolled period. Their coverage begins on enrollment (April 1 or later) and the ARPA Subsidy pays the premiums for it until either September 30, 2021, or coverage ends, whichever comes first.
Electing non-continuous COBRA during the special enrollment period does not affect the timeline of the AEI’s 18-month maximum coverage eligibility, which tolls from the original QE date.
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