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ARPA: A 100% COBRA subsidy?!?

Updated: May 4, 2023

On March 11, 2021, the President signed into law the American Rescue Plan Act (ARPA) H.R.1319. Under the latest stimulus legislation, eligible COBRA participants will be able to receive a temporary 100% subsidy for their COBRA premiums where the qualifying event was involuntary termination or reduction in hours (was previously an 85% subsidy, but subsequently increased in the Senate version). It is not, however, available for employees whose termination of employment is voluntary. The subsidy will be provided by the federal government via payroll tax credits for employers, which will last a total of 6 months, beginning on April 1, 2021 and ending on September 30, 2021. The assistance may end sooner if the qualified beneficiary’s maximum COBRA coverage period ends or if the participant is eligible for another group health plan or Medicare. As is normally the case, individuals must notify the former employer if they become eligible for other group coverage or Medicare. However, unlike normal COBRA procedures, ARPA imposes a penalty of $250 if the individual fails to provide notice of eligibility for other group or Medicare coverage. If the failure to notify is found to be intentional, the penalty is the greater of $250 or 110% of the subsidy amount. Subsidy-eligible participants do not pay COBRA premiums, but instead the premiums are paid by the self-funded or fully-insured employer and then reimbursed by application to the federal government for a tax credit. ARPA also gives enrollment opportunities for individuals who’ve already experienced an involuntary termination of employment or reduction in hours within the last 18 months and did not timely elect COBRA or dropped COBRA. These individuals will have a new 60-day election window following the date that they receive a new required COBRA notice. In addition, employers may allow subsidy-eligible qualified beneficiaries to change elections to other plan options that have the same or lower cost premiums (optional). Employers must provide a revised COBRA notice to all individuals that may be eligible for the subsidy. This will require employers to amend their current COBRA notice and election forms. In addition, employers will need to provide notices to eligible workers who haven’t elected COBRA by April 1 and those who elected COBRA coverage but then later dropped it. Those former employees may elect COBRA coverage during an enrollment period starting April 1 and ending 60 days after the date on which the notice regarding the subsidy was delivered. Also, employers must provide a notice of expiration before the premium subsidy expires. Failure to provide the notice is treated as a failure of the COBRA notice requirements.

To assist employers, new model COBRA notices will be issued by the Department of Labor within 30 days after ARPA is enacted into law. H.R.1319 - American Rescue Plan Act of 2021:

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