COBRA Subsidy Provisions of the American Rescue Plan Act

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, even if they declined or dropped COBRA or mini-COBRA coverage earlier.

Who is Eligible?

The subsidy is generally available to people who elected COBRA, become eligible for COBRA, or declined or discontinued COBRA and are still within their original COBRA coverage period.

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.

How is the Subsidy Funded?

The subsidy is funded by a refundable, advanceable credit against payroll taxes taken by employers or carriers.

Notice Requirements

Employers are required to provide new notices about the subsidy to employees. In an effort for employers to be proactive, we worked with our partners at Synergy Human Resources to create an attorney prepared Model COBRA Subsidy Notice that can be used. To download this notice click the button below. The U.S. Department of Labor (DOL) will eventually be issuing model notices for plans to use.

Action Steps for Employers

Employers should familiarize themselves with the provisions of the ARPA and watch for agency guidance on its implementation.

Read the full compliance bulletin linked below for more information.

If you have questions related to this update, please contact your North Risk Partners advisor. Don’t have an advisor? No problem. We’ll help you find one.

This regulatory update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.