The U.S. Department of Labor issued additional guidance about COBRA premium assistance under the American Rescue Plan Act. This guidance includes model notices and a series of frequently asked questions. Refer to the questions and answers below for BAS’ interpretation of this guidance.
Q: What is ARPA?
A: The American Rescue Plan Act of 2021 (“ARPA” or “ARP”) was signed into law March 11, 2021. It is the most recent Federal stimulus legislation that includes temporary changes to COBRA.
Q: What is COBRA premium assistance under ARPA?
A: ARPA provides temporary premium assistance for COBRA continuation coverage for assistance-eligible individuals. Certain eligible COBRA continuants may receive a 100% COBRA premium subsidy for COBRA coverage between 4/1/21-9/30/21 (while they remain eligible for the subsidy). This means that these eligible continuants pay $0 for their coverage.
Q: Does the premium assistance apply to only federal COBRA?
A: The premium assistance applies to both federal and state continuation (aka mini-COBRA). It does not apply to religious group continuation of coverage, unless the religious group is obligated to follow state continuation laws.
Q: Who may be eligible to get COBRA premium assistance?
A: An individual may be eligible for premium assistance if they are eligible for and elect COBRA continuation coverage because of their own or a family member’s reduction in hours or involuntary termination of employment. The premium assistance is available for periods of COBRA coverage from April 1, 2021 through September 30, 2021. To be eligible for COBRA premium assistance, the individual must still be within the 18-month maximum coverage period. This captures individuals with a federal-COBRA qualifying event occurring 11/1/2019 or later (state timeframes may differ). The individual must not be eligible for other group health coverage or Medicare.
Q: Is the premium assistance available for family members of an assistance-eligible individual?
A: Yes.
Q: Is the premium assistance available to people on COBRA due to divorce, death of employee or dependent too old for the plan?
A: No
Q: How long is the COBRA premium assistance available?
A: The COBRA premium assistance is available from April 1, 2021 through September 30, 2021. A continuant must continue to meet the eligibility requirements to get the premium assistance.
Q: When will the COBRA premium assistance end?
A: The COBRA premium assistance will end upon the first to occur of the following:
Q: Can coverage be continued after the premium assistance period ends?
A: If a continuant is still within the COBRA duration period, coverage may continue after the premium assistance ends. If COBRA is continued after the premium assistance period, the continuant may have to pay the full amount of the premium otherwise due. Failure to pay may result in the loss of COBRA continuation coverage.
Q: Is enrollment in the Health Insurance Marketplace permitted at the end of the ARPA premium assistance period?
A: When the COBRA premium assistance ends, individuals may be eligible for Medicaid or a special enrollment period to enroll in coverage through the Health Insurance Marketplace. A special enrollment period is also available at the end of the maximum COBRA duration period.
Q: What coverage is eligible for premium assistance?
A: Premium assistance may be available for COBRA medical coverage, dental coverage, prescription coverage, vision coverage, HRA coverage. The premium assistance will not apply to FSA coverage continued under COBRA.
Q: Does the individual have to continue coverage under the same plan or may the continuant elect a new plan?
A: Employers may, but do not have to, offer continuants the option to switch to a lower cost health plan. If an employer elects this option, the continuant may elect to change health plans. The continuant will have a 90-day window to change plans.
Q: Is the premium assistance available only to people who are currently continuing coverage on COBRA?
A: If an individual was offered Federal COBRA coverage as a result of a reduction of hours or involuntary termination of employment, and the individual declined to take COBRA coverage at that time, or the individual elected Federal COBRA coverage and later discontinued it, the individual has another opportunity to elect Federal COBRA continuation coverage and receive the premium assistance, if the maximum COBRA duration period has not yet expired. This would apply to someone with an eligible qualifying event of reduction in hours or involuntary termination of employment occurring 11/1/2019 or after. This second-chance election applies only to Federal COBRA continuation (not state mini-COBRA).
Q: If an employee with an involuntary termination of employment or reduction of hours was offered Federal COBRA and declined, never elected Federal COBRA, or elected but discontinued Federal COBRA coverage, how will the individual know about the COBRA premium assistance?
A: The person must be given an additional COBRA election opportunity at this time. Individuals eligible for the additional COBRA election period must receive a notice explaining the premium assistance and giving the person a right to elect (or re-elect) COBRA at the $0 rate. The notice must be provided by May 31, 2021 and individuals have 60 days after the notice is provided to elect COBRA. The additional election period does not extend the period of COBRA continuation coverage beyond the original maximum COBRA duration period. The additional election period does not apply to state mini-COBRA. If your organization uses BAS for COBRA services, BAS will send this notice on your behalf.
Q: How long does this new election period last?
A: The new second-chance election period lasts for 60 days from the date notice is given.
Q: If a person elects COBRA during this new second-chance election period, is COBRA given back to the original qualifying event date?
A: The new second-chance COBRA coverage starts on or after April 1, 2021. Individuals may begin their coverage prospectively from the date of their election, or if an individual has a qualifying event on or before April 1st, choose to start their coverage as of April 1st, even if the individual receives an election notice and makes such election at a later date.
Q: If someone elects COBRA during the new second-chance election period and had back-premiums due for prior months of coverage, does the person have to pay the outstanding back premiums in order to be reinstated in coverage on April 1, 2021 or after?
A: No. The person does not have to pay back premiums and the new second-chance COBRA coverage may begin on or after 4/1/2021.
Q: Does this new second-chance COBRA coverage starting April 1, 2021 extend the COBRA period?
A: No. The continuant’s maximum COBRA duration period runs from the date of the original qualifying event. For example, if the employee was offered COBRA 7/1/2020 and did not elect, the person can elect with coverage starting 4/1/2021 (a lapse in coverage), but the maximum COBRA period would still end 18 months after 7/1/2020.
Q: Does ARPA allow continuants to extend their COBRA period past 18 months (or other maximum time period under state mini-COBRA)?
A: No
Q: How do individuals apply for the premium assistance?
A: Employers must provide assistance-eligible individuals notice of eligibility to elect COBRA and to receive premium assistance. The notice should include forms necessary for enrollment, including forms for the individual to indicate that the individual is eligible for assistance and not eligible for other group health coverage or Medicare. If your organization uses BAS for COBRA services, BAS will send the appropriate letters on your behalf.
Q: Can assistance eligible individuals who are enrolled in Marketplace coverage switch to COBRA continuation coverage with premium assistance?
A: Yes. Potential assistance-eligible individuals can use the second-chance COBRA election period to change from individual health coverage (through the Marketplace or otherwise) to COBRA continuation coverage with premium assistance.
Q: What happens if an individual thinks they are eligible for assistance but does not receive a notice?
A: An individual who thinks they are an assistance-eligible individual but does not receive notice from their employer should notify the employer of a request for treatment as an assistance-eligible individual.
Q: Do employers have to pay the COBRA continuant the premium amount?
A: No. Individuals do not receive a payment of the premium assistance. Instead, eligible individuals just do not pay any of the COBRA premium for the period of coverage from April 1, 2021 through September 30, 2021.
Q: If the continuant gets premium assistance for COBRA coverage and does not have to pay, who does pay for the coverage?
A: Employers will pay the monthly premiums to the insurance carrier like they do now. The employer will take a payroll tax credit in an amount equal to the cost of the COBRA coverage. The tax credit will be taken against the quarterly tax statement. In certain cases, the credit can be advanced and the amount is refundable if there is not sufficient taxes due to cover the credit. The IRS will be issuing guidance on the specifics of how to take the tax credit.
Q: Do employers have to refund premiums already paid for coverage before April 1, 2021?
A: No. The COBRA premium assistance applies only to premiums for coverage periods from April 1, 2021 through September 30, 2021. If a continuant enrolled in, and paid for, prior months of coverage, no refund has to be provided.