The American Rescue Plan Act of 2021, signed into law by President Biden on March 11, 2021, includes provisions that affect employee benefits plans including a temporary 100% federal subsidy of COBRA payments. Here are our 6 most Frequently Asked Questions:

Q: Who’s eligible to qualify for the subsidy?

A: Individuals who lost coverage and became Cobra eligible due to involuntary termination or reduction in hours (voluntary and gross misconduct terminations are NOT eligible). This includes those who: are currently on or newly eligible for COBRA; were previously COBRA eligible but did not elect; or who’s coverage lapsed (with a loss of coverage starting November 1, 2019 or afterwards). Those that are eligible for Medicare or other group coverage are not eligible for this subsidy.

Q: What benefits are eligible for the subsidy?

A: The full COBRA premium (including 2% COBRA administration fee) for enrolled medical, dental & vision coverage during the subsidy period.

Q: What is the premium subsidy period?

A: The six months beginning April 1, 2021 and ending September 30, 2021 or until their COBRA coverage expires, whichever comes first. Additionally, if an individual becomes eligible for Medicare or other group coverage (including a spouse’s employer-sponsored health plan), the subsidy will end effective the end of that month.

Q: How is the COBRA subsidy administered?

A: Cobra administrators are required to send a COBRA subsidy notice to those who may be subsidy eligible by May 31, 2021. Those currently on COBRA and who qualify for the subsidy will not be billed by the COBRA administrator during their subsidy period.

Those currently NOT on COBRA may now elect COBRA coverage for the period beginning April 1, 2021, without requiring payment of retroactive premiums to their original loss of coverage date.

Q: How is the employer reimbursed for subsidized COBRA?

A: As COBRA premiums are traditionally billed by insurance carriers to each employer plan sponsor, employers will need to apply for subsidy reimbursement by offsetting eligible COBRA subsidies with a credit towards their federal payroll taxes filings.

Non-subsidized COBRA coverages will continue to be billed by the COBRA administrator and premiums remitted to the employer sponsor.

Q: Does the federal subsidy apply to Cal-COBRA (groups under 20)?

A: Yes – however, the insurance carriers will be responsible for applying for the subsidy credit.

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