Sponsors of group health plans have new responsibilities following the passage of the American Rescue Plan Act (“ARPA”) on March 11, 2021. Under ARPA, certain participants and beneficiaries of employer-sponsored health plans are eligible for a federal subsidy, which will cover for a limited period 100% of the premium for COBRA continuation coverage. The subsidy is also available in the case of plans covered by Florida’s mini-COBRA law, which applies to group health plans of employers having fewer than 20 employees.
The Importance of Being an “Assistance Eligible Individual”
Federally subsidized COBRA coverage is available only to a person who is an Assistance Eligible Individual (“AEI”) under ARPA. This term comprehends an employee or former employee, and any dependent, losing group health plan coverage as a result of an employee’s reduction in work hours or involuntary termination.
Persons losing coverage because of an employee’s voluntary retirement are not AEIs. Nor is anyone who is eligible for coverage under another group health plan, such as through a spouse’s employment, or for Medicare, an AEI, even though they don’t enroll in the alternative coverage. These individuals may be eligible to elect COBRA, but they will generally have to pay for the coverage themselves.
ARPA Subsidy Availability
The COBRA subsidy first became available on April 1, 2021, but can be retroactively effective to that date for AEIs having COBRA coverage at the time, who may be reimbursed for premiums they paid or receive a credit against future premiums.
In many cases, an AEI who was not already covered by COBRA at the beginning of the subsidy period will be able to elect COBRA continuation coverage retroactive to April 1, 2021, and have the cost of the coverage completely paid by the federal government, regardless of its cost or the individual’s income level.
The longest period any AEI can qualify for a subsidy is six months, and no AEI can receive a subsidy for a coverage period extending beyond September 30, 2021.