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News

American Rescue Plan COBRA Subsidy

Posted on Thursday, March 18, 2021 at 3:05 PM
Group Health Insurance Erie PA

***Disclaimer: The IRS and DOL have yet to finalize details on implementing these guidelines***

100% Subsidy for a Maximum Period of Six Months (April 1, 2021 – September 30, 2021)

Under the ARPA, certain individuals and their families who lost coverage due to the individual’s involuntary termination or reduction of hours are eligible for a 100% COBRA premium subsidy for coverage other than a Health FSA.  The subsidy period is a maximum of 6 months beginning April 1, 2021 and ending September 30, 2021.  The applicable COBRA premium during the COBRA subsidy period is paid 100% by the who will receive reimbursement for such payment from the federal government through a payroll tax credit. 

For insured group plans not subject to federal COBRA (e.g., when state mini-COBRA requirements apply to exempt small employer plans or to large group plans after federal COBRA is exhausted), the insurance carrier is responsible for complying with the COBRA subsidy provisions.

If a subsidy eligible individual reaches the end of their maximum period of COBRA coverage prior to the end of the COBRA subsidy, the subsidy period is shortened (the COBRA subsidy does not expand the maximum COBRA coverage period).  Additionally, an individual who becomes eligible for other group health plan coverage or Medicare will lose eligibility for the COBRA premium subsidy.  Individuals are required to provide notification if they become eligible for other group health plan coverage or Medicare.  A financial penalty applies to individuals who fail to provide notification of eligibility for other group health coverage or Medicare.

Who is Eligible? Assistance Eligible Individuals (“AEI”) and Extended Election Rights

The COBRA premium subsidy is available to assistance eligible individuals (“AEIs”) for the period April 1, 2021 to September 30, 2021.  An AEI is defined as a qualified beneficiary who:

1.Is eligible for COBRA due to a qualifying event of involuntary termination or reduction of hours and

2. Elects COBRA for a period of coverage that falls within the subsidy period.

Certain individuals not currently on COBRA may have extended COBRA election and be will be able to take advantage of the subsidy effective April 1, 2021.  Beginning April 1, 2021 and ending 60 days after they are notified of the extended election right the following individuals have a 60-day extended COBRA election timeframe:

  • Individuals who do not have an election of COBRA in place on April 1, 2021, but would be an assistance eligible individual (i.e., involuntary termination or reduction of hours) if they had elected COBRA; and
  • Individual who elected COBRA and discontinued such coverage before April 1, 2021, but would otherwise be an AEI (i.e., involuntary termination or reduction of hours) and are still within their maximum COBRA coverage period.

 

Individuals electing COBRA during the 60-day extended election period are making “prospective” elections with coverage beginning April 1, 2021 (not retroactive to the original loss of coverage) and the individual’s maximum COBRA coverage period is not extended.

   


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