The recently enacted American Rescue Plan Act (ARPA) includes a program to subsidize 100% of premium costs for individuals on COBRA between April and September 2021.
To qualify for the ARPA subsidy program, an individual must:
- Be eligible for COBRA due to an involuntary termination or a reduction in hours,
- Elect COBRA, and
- Not be eligible for coverage through any other group health plan (such as the plan of a new employer, or the plan of a spouse’s employer), or through Medicare.
An individual who qualifies to receive a subsidy is called an Assistance Eligible Individual, or AEI.
Employers that are subject to federal COBRA—20 or more employees—must cover the cost of the member’s premium, but may then seek reimbursement through a credit on their federal payroll tax filing.
For employers that are subject to Massachusetts state mini-COBRA—two to 19 employees—their insurer must cover the cost of the member’s premium and then seek reimbursement. See the mini-COBRA section below for more information for employers subject to Massachusetts state mini-COBRA.
The subsidy program includes the following:
- Individuals who become newly eligible for COBRA on or after 4/1/2021.
- Individuals already on COBRA prior to 4/1/2021, who remain on COBRA on or after 4/1/2021.
- Individuals previously eligible for COBRA who declined coverage (or elected COBRA coverage but subsequently let it lapse), and would have been eligible to be on COBRA on or after 4/1/2021 if they had elected coverage (or had not allowed it to lapse). These individuals must be given a “second chance” to elect COBRA within 60 days of when they are notified of the availability of the subsidy. If they elect COBRA coverage, it is not retroactive to their original COBRA eligibility date. Their election may be either retroactive to 4/1/2021, or prospective from the date of election.
If an individual qualifies for the subsidy program, no premium amounts should be collected from that individual for their period of eligibility. If the individual is not determined to be eligible for the subsidy program until after their initial eligibility date has passed, and premiums have already been collected for the relevant time period, those premium amounts should be refunded or credited to the member.
Once an AEI begins to receive a subsidy, the subsidy will continue until the earliest of the following occurs:
- The subsidy program ends (9/30/2021).
- The individual no longer qualifies for the subsidy program due to becoming eligible for coverage through a group health plan or Medicare.
- The individual’s underlying COBRA eligibility ends because they have reached the end date of their term of COBRA eligibility. For example, the member was eligible for COBRA for a term of 18 months, and that 18-month period ends.
Please note: For individuals already on COBRA prior to 4/1/2021, or who get a “second chance” to enroll based on a qualifying event that occurred prior to 4/1/2021, there is nothing in the ARPA subsidy program that extends their term of COBRA eligibility. They remain eligible for COBRA only until the date called for by their original qualifying event.
Notification requirements for employers
Employers must abide by the following notification requirements:
Employers must incorporate information about the subsidy program into the materials they send to individuals newly eligible for COBRA on dates on or after 4/1/2021. This must be done by May 31, 2021.
Employers must notify individuals on existing COBRA coverage as of 4/1/2021, or who would have been eligible to be on COBRA coverage as of 4/1/2021 if they had elected COBRA (or if they had not allowed it to lapse) about the subsidy program. This must be done by May 31, 2021.
- If an individual begins to receive a subsidy, but their subsidy ends prior to 9/30/2021, the employer must send the individual a notification. The notification must be delivered during a 60-day window extending from 45 days before the subsidy ends up to 15 days after it ends.
Federal regulators have posted information about the subsidy program online, including model notification forms. See the following links:
The ARPA subsidy program applies to employers subject to both federal COBRA—20 or more employees—and Massachusetts state mini-COBRA—two to 19 employees. However, there is one key difference between the two.
For employers subject to Massachusetts state mini-COBRA (two to 19), it is the insurer, not the employer, who is required to subsidize the cost of the AEI’s premium up front. As a result, Fallon Health will subsidize the premium for AEIs enrolled in groups subject to state mini-COBRA. Fallon will then be eligible to seek reimbursement through payroll tax filings, similar to the process followed by employers subject to federal COBRA.
All other requirements of the subsidy program apply to mini-COBRA employers. Mini-COBRA employers are responsible for sending out all required notifications to COBRA-eligible individuals.
For more information
If you have any questions, please contact Fallon Health Sales Operations