The American Rescue Plan Act of 2021 – COBRA subsidy

Written by
Karynn Needel

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On March 11, President Biden signed the American Rescue Plan Act of 2021 (ARPA) into law,

ARPA provides additional relief to address the continued impact of the COVID-19 pandemic on the economy, public health, state and local government, individuals, and businesses, by extending and expanding on some of the previously enacted COVID-19 stimulus provisions and measures.

One specific provision of the act relates to COBRA coverage.  As a reminder, participants in a group health plan may elect to continue group coverage, typically for up to 18 months, by electing COBRA coverage and paying the full premium plus an optional 2% administrative fee to their employers for the continued benefit.

Notably, ARPA  allows 100% of the COBRA cost for employees and family members who currently have COBRA coverage to be subsidized through payroll tax credit for up to six months if the employee or family member lost health coverage because of an involuntary termination or involuntary reduction in hours for the period beginning on April 1, 2021 and ending on September 30, 2021.

ARPA also provides a “second chance” election for those who did not initially elect COBRA or who let their COBRA coverage lapse. These participants will have sixty days after the receipt of the notice to elect the COBRA coverage. This coverage would be prospective only, and not retroactive to the date coverage was lost.

Employers will need to send a notice to each of these employees (and their covered family members). The Department of Labor is issuing model notices and guidelines by May 10th.

The Act does not extend COBRA coverage – coverage will still expire 18 months after coverage was lost, even if that is in the middle of the subsidy period.

Any employee or family member who is or becomes eligible for other group health coverage or Medicare will not be eligible for the subsidy. The individual has the obligation to notify the employer if he or she is not eligible or loses eligibility. Additionally, any employee who left voluntary will not be eligible for this program.

Need further help from Insource?

If you need any COBRA-related assistance or have a question about the American Rescue Plan Act of 2021, we are on hand to provide guidance.

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