American Rescue Plan Act COBRA FAQs
Signed into law on March 11, 2021, the American Rescue Plan Act (ARPA) includes a 100% subsidy on COBRA premiums for six months. We have compiled this list of frequently asked questions about this provision and its impact on employers and individuals. Answers are subject to change pending additional guidance from the U.S. Department of Labor (DOL), the Employee Benefits Security Administration (EBSA) and/or legal counsel.
[Updated June 29, 2021]
ELIGIBILITY & REQUIREMENTS
- Who qualifies?
- Who determines whether a termination was involuntary, or what constitutes a reduction in hours?
- How is eligibility determined?
- If a participant determines they are an AEI but the employer/plan sponsor disagrees, what happens?
- What plans are subject to the provisions under ARPA?
- Is it possible for an employer/plan sponsor to opt out of COBRA subsidy provisions under ARPA?
- How do you plan to send the ARPA notices, and will they be online for clients and participants to view?
- When will the look-back ARPA notices be mailed?
- Based on the COVID-19 Outbreak Period, if a participant's initial COBRA start date is February 1, 2021, can they wait beyond the normal 60-day election period and request their COBRA start date instead be April 1, 2021 or later?
- Is an employer required to re-communicate COBRA eligibility to anyone who terminated since October 2019 and provide them another opportunity to elect COBRA?
COVERAGE & ENROLLMENT
- Will participants be able to apply for the subsidy online?
- If someone elected COBRA to be effective February 1, 2021 but has not paid, are they still able to do so?
- What will the process be if a participant wants to re-enroll in coverage?
- What steps are necessary if a participant needs to change coverage?
- How will the lower-cost coverage employer option be handled?
PAYMENTS & FEES
- How will the 2% administration fee be billed?
- Should participants pay for April or subsequent months?
- If a participant pays for COBRA then is later approved for the subsidy for some or all of those months of coverage, should the client refund their premiums?
- What happens if a participant has an employer-paid severance arrangement and qualifies as an AEI with the subsidy?
REPORTING
CARRIER & VENDOR CONSIDERATIONS
STATE CONTINUATION
ELIGIBILITY & REQUIREMENTS
Who qualifies?
The subsidy may be available to Assistance Eligible Individuals (AEIs) who lost health coverage by reason of their own or a family member's involuntary termination or reduction in hours from the period of October 2, 2019 to the present. The subsidy may be available from April 1, 2021 to September 30, 2021 and is open to any individual who is already enrolled in COBRA or enrolls in COBRA during the special enrollment period. Under the federal regulations, certain state continuation participants are also eligible for the subsidy, but no provision of the federal law changes any parameters of the existing state regulations.
Who determines whether a termination was involuntary, or what constitutes a reduction in hours?
It is the client's (employer's) responsibility to make these employment separation decisions and notify TASC of the qualifying event as always.
How is eligibility determined?
The new election notice template going to qualified beneficiaries will educate them on the subsidy so they can self-certify if they determine they qualify. TASC will notify clients as we receive these attestations. If the employer/plan sponsor agrees with the individual's determination, no additional action is required.
If a participant determines they are an AEI but the employer/plan sponsor disagrees, what happens?
The participant will be able to contact a benefit advisor with the DOL to dispute the decision. The DOL will gather relevant information from all parties; if the DOL sides with the participant, they will notify TASC to re-apply subsidies.
What plans are subject to the provisions under ARPA?
The plans included are medical, dental and vision coverage; Health Reimbursement Arrangements (HRAs); and Employee Assistance Programs (EAPs). It does not include Flexible Spending Account (FSA) plans.
Is it possible for an employer/plan sponsor to opt out of COBRA subsidy provisions under ARPA?
No. The ARPA provisions pertaining to COBRA, like COBRA itself, are not optional—they're the law.
How do you plan to send the ARPA notices, and will they be online for clients and participants to view?
Regulations require notices to be mailed to the participant's last known address. We will be performing the ARPA participant look-back mailings outside of our application in order to meet compliance deadlines.
When will the look-back ARPA notices be mailed?
We will ensure compliance by mailing before May 31, 2021.
Based on the COVID-19 Outbreak Period, if a participant's initial COBRA start date is February 1, 2021, can they wait beyond the normal 60-day election period and request their COBRA start date instead be April 1, 2021 or later?
Correct, this is an intersection between the already-announced COVID-19 legislative extensions on elections/payments and the new provisions of ARPA. However, the deadline for claiming the ARPA subsidy is not extended by the same rules; AEIs must elect within 60 days. In practical terms, AEIs must elect COBRA now in a normal 60-day window rather than in an extended COVID-19 election period if they want the 100% COBRA subsidy.
Is an employer required to re-communicate COBRA eligibility to anyone who terminated since October 2019 and provide them another opportunity to elect COBRA?
The COBRA subsidy could actually be available to someone whose COBRA start date was October 2, 2019 or after. They could have the 100% subsidy for their plans effective April 1, 2021 and then coverage could expire at the end of their 18-month continuation time frame.
COVERAGE & ENROLLMENT
Will participants be able to apply for the subsidy online?
Participants will not be able to do so online. Our communications will direct them to elect on paper and send their AEI attestation form with the election document.
If someone elected COBRA to be effective February 1, 2021 but has not paid, are they still able to do so?
Yes, because of the extended payment time frame from earlier legislation. The individual will be able to start coverage either as of February 1 if they choose to pay now or as of April 1, 2021 if they want the 100% subsidy (with a gap in coverage).
What will the process be if a participant wants to re-enroll in coverage?
Participants will use the ARPA Election Form, which we will send before May 31, 2021. They will have 60 days to return the form from the date of mailing. This may result in a lapse in coverage. Please note, there is a dual option under the Outbreak Period (determined at the individual level).
What steps are necessary if a participant needs to change coverage?
If the employer permits it, this may be done following the same method we use for open enrollment. The administrative detail on this option is still to be determined.
How will the lower-cost coverage employer option be handled?
If an employer decides to allow it for their plans, AEIs may elect continuation with 100% subsidy for plans that are the same or lower cost than the one in place at the time of their qualifying event (QE), likely through a process similar to open enrollment (OE). Clients should complete an Open Enrollment Request Form, provide coverage summaries and list the participants who should receive notification. Participants may not elect any new types of benefits that were not previously offered, however.
- Example 1: An AEI had dental coverage only at the time of their QE. They now want to elect medical coverage. This is not permitted, although they can switch to a lower cost dental plan with 100% subsidy or keep their same dental plan with 100% subsidy.
- Example 2: An AEI had medical and dental coverage offered at time of their QE and elected dental coverage only. They can now elect medical coverage and dental coverage starting April 1, 2021 with 100% subsidy for both benefits.
PAYMENTS & FEES
How will the 2% administration fee be billed?
TASC will be billing this directly to clients on a monthly basis. Since participants receiving the subsidy will not be billed, we will instead invoice any allowed administration fees to the client. The 100% subsidy covers the COBRA applicable premium, including the 2% administration fee.
Should participants pay for April or subsequent months?
This is left up to the participant's discretion. However, it's important to note they would likely incur loss of coverage until their AEI status is confirmed, subsidy applied, etc. To ensure active coverage, they should elect COBRA and pay premiums as normal. If necessary, we will issue refunds to participants directly.
If a participant pays for COBRA then is later approved for the subsidy for some or all of those months of coverage, should the client refund their premiums?
Under no circumstances should a client refund any COBRA premium payments to a participant. We must perform all participant premium refunds to ensure financial integrity of our application as we may also need to refund the premium plus allowed administration fees (i.e., 2%).
What happens if a participant has an employer-paid severance arrangement and qualifies as an AEI with the subsidy?
If a participant has an employer-paid severance arrangement and qualifies as an AEI, the employer-paid severance will take precedence. In the event the employer-paid severance is a partial severance (such as 25%) there could be situations where dual subsidy will apply (employer paid and ARPA to cover the premium balance). This was recently clarified in IRS Notice 2021-31.
REPORTING
How will clients recoup ARPA premiums on their quarterly payroll taxes?
Clients will be provided with an Employer Subsidy Application Report (ESAR) to assist them in filing ARPA subsidy credits. The ESAR will capture ARPA subsidized premiums by participant, plan, and coverage period. The report will have a summary total which includes 100% of the COBRA/State Continuation premium, which includes any applicable administration fees (i.e., 2%).
CARRIER & VENDOR CONSIDERATIONS
Will disbursement of COBRA premiums directly to the carrier continue with 100% subsidized coverage under ARPA?
For contracted clients with this service feature, we will continue to apply and disburse premiums to insurance carriers for the premiums received. We will not disburse any premiums to carriers for AEIs with 100% subsidized coverage, however; clients will be required to remit premiums to carriers directly.
STATE CONTINUATION
Does the ARPA subsidy for COBRA also apply to groups smaller than 20 employees that are eligible for State Continuation?
Yes. The federal legislation contains language that the 100% subsidies are available for comparable state continuation plans. We may need clarification from individual state governments to determine actual application of the ARPA provisions.