The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) provides employees who would lose employer-sponsored health insurance because of termination or a reduction in working hours the opportunity to continue that coverage for 18 months at their cost.
In response to COVID-19, The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021 and includes a federally funded COBRA subsidy that is available for up to six months for eligible individuals.
What does this mean?
When an individual is employed full-time, a portion of their health insurance premium is often paid by their employer for or offered as part of their employee benefit package. If someone is laid off or no longer qualifies for benefits due to a reduction in hours and they decide to continue their coverage under COBRA, they are typically responsible for the full cost of the premium.
The APRA would provide a 100% subsidy to eligible individuals of COBRA premiums from April 1, 2021 through September 30, 2021 for employees and their family members who lost health insurance benefits due to involuntary termination or a reduction in hours.
Who is Eligible?
Assistance Eligible Individuals (AEIs) are qualified beneficiaries under either federal COBRA or a state program that provides comparable continuation coverage:
- If they experienced involuntary termination or reduction of hours and
- If their original 18 months of COBRA coverage would include any period from 4/1/2021 – 9/30/2021.
Eligible individuals would be able to elect subsidized COBRA even if they had previously declined it or enrolled and then dropped it. However, the subsidy would not apply to employees who voluntarily terminated their employment or who qualify for another group health plan.
What is the timeline for subsidized coverage?
If an AEI already qualified for COBRA at the beginning of the subsidy period, their subsidized coverage begins on 4/1/2021. If they become newly eligible for subsidized coverage during the period of 4/1/2021 and 9/30/2021, the subsidized coverage starts the day their COBRA coverage begins.
The subsidy is available until 9/30/21 but will end early if the individual reaches their maximum 18-month COBRA coverage period or becomes eligible for another group health plan coverage or Medicare before that date.
The Department of Labor issued a notice providing guidance on continuation of relief for employee benefits plans and plan participants and beneficiaries due to the COVID-19 outbreak. For more information, the information is linked HERE.