The American Rescue Plan Act of 2021 (ARPA) was signed into law on March 11, 2021. While the specifics are still developing, here are eight things to know about the COBRA subsidy included in the bill.
- 100% subsidy.
The final bill and subsidies version includes a 100% subsidy. This allows eligible individuals to obtain COBRA continuation coverage for their health plan without paying COBRA premiums.
- It’s very specific.
The COBRA subsidy is only available for premiums due from April 1, 2021, through September 30, 2021, referred to as the subsidy period. To be eligible, individuals must be in their 18-month Federal COBRA Coverage period.
- It is not automatic.
While newly eligible individuals will not need to pay premiums, they will still need to elect COBRA coverage to take advantage of the subsidy.
- Employers are accountable for paying premiums but will receive a tax credit.
Employers sponsoring a group health plan will be responsible for paying the health insurance carriers for the premiums. Employers will be reimbursed for 100% of the COBRA premiums through tax credits against certain payroll taxes.
- New and previous qualified beneficiaries may be eligible.
The COBRA subsidy is available for individuals who are or become qualified beneficiaries due to involuntary termination of employment or a reduction in hours. This may include individuals who:
- become eligible for COBRA during the subsidy period
- previously elected COBRA coverage and have paid premiums for prior months
- have not elected COBRA coverage but are still eligible to elect COBRA
- Eligible individuals must be notified.
Eligible individuals need to receive an updated notification regarding their rights to COBRA and the COBRA subsidy. The Department of Labor and Department of Health and Human Services is expected to provide new model notices within 30-days of enactment of the law.
- COBRA Subsidy apply to Group Plans, except FSAs.
The 100% COBRA subsidy applies to the underlying medical coverage, dental and vision plans. Participants may still be responsible for premiums if they elect coverage for an FSA (or other benefits being offered post-employment).
- Individuals could elect a change of coverage.
Suppose an employer permits individuals to change coverage. In that case, the premium subsidy cannot exceed the cost of the coverage option the individual was in at the qualifying event.
For example: Assume that an employee was enrolled in Plan A and the premium was $500 per month at the time of termination. They have an opportunity to enroll in Plan B, but it costs $700 per month. The employee’s subsidy cannot exceed the original premium of $500 per month.
Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.
