COBRA Subsidy Provisions of the American Rescue Plan Act (ARPA)

The American Rescue Plan Act (ARPA), signed into law March 11, 2021, provides a 100% subsidy of premiums for employer-sponsored group health insurance continued under the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), and similar state continuation of coverage (mini-COBRA) programs.

ARPA subsidies cover the full cost of COBRA or mini-COBRA premiums from April 1, 2021, through Sept. 30, 2021, for employees (and their qualifying family members), if the employee lost or loses group health insurance due to an involuntary job loss or reduction in work hours. The subsidy applies to people who are still within their original COBRA or mini-COBRA coverage period, for the length of that coverage period. Coverage under federal COBRA is available to individuals eligible for the subsidy even if they declined or dropped COBRA or mini-COBRA coverage earlier.

The subsidy does not apply to:

• Individuals whose job loss was voluntary or the result of gross misconduct; or
• Individuals who are eligible for another group health plan or Medicare.

Assistance-eligible Individuals

Individuals are considered “assistance-eligible individuals” by the ARPA statute, and eligible for the COBRA subsidy if they:

• Are a qualified beneficiary of the group health plan;
• Are eligible for COBRA or mini-COBRA continuation coverage because of the covered employee’s involuntary termination (unrelated to gross misconduct) or reduction in hours of employment; and
• Elect continuation coverage.

Extended Election Period

The ARPA allows individuals to elect subsidized COBRA if they:

• Become eligible for COBRA or mini-COBRA due to involuntary job termination (not caused by gross misconduct) or reduction in hours between April 1 and Sept. 30, 2021;
• Previously declined federal COBRA after becoming eligible due to involuntary job termination (not caused by gross misconduct) or reduction in hours, but would still be within their federal COBRA coverage period had they elected the coverage at that point; or
• Previously elected federal COBRA but discontinued the coverage before April 1, 2021.

The election period for subsidized COBRA under ARPA begins on April 1, 2021, and runs until 60 days after the date individuals receive notice from the health plan of the availability of the COBRA subsidy.

Duration of Coverage

COBRA coverage under the ARPA election extension starts with the first period of coverage beginning on or after April 1, 2021, and continues through the end of the individual’s COBRA coverage period. The individual’s COBRA coverage period is the period that would have applied had the individual elected the continuation of coverage when first eligible following the initial qualifying event. For individuals who previously elected COBRA, discontinued it and are now using the ARPA extended election period to obtain COBRA, the COBRA coverage period is calculated as if they had not dropped the coverage.

Notice Requirements

The ARPA imposes new COBRA notice requirements on health plans. Model notices have been provided by the DOL. Please contact our COBRA administration team for more information on required notices, or click here.

Tax Credit

The ARPA COBRA subsidy is funded through a tax credit to employers whose plans are subject to federal COBRA or are self-insured, to the plan for multiemployer plans, and to the insurer for other plans. The credit is taken against payroll taxes. It can be advanced (according to forms and instructions to be provided by federal agencies) and is fully refundable. The credits will be provided each quarter in an amount equal to the premiums not paid by assistance-eligible individuals.

Please click for additional information on COBRA Subsidy Provisions of the American Rescue Plan Act.

The DOL has also released ARPA COBRA Subsidy FAQs to clarify questions regarding eligibility, premiums and notices, and provide details for individuals and their families. 

For additional questions, or information on how Bene-Care can manage your COBRA administration, please contact us!