American Rescue Plan (ARP) Act COBRA Subsidy Information for COBRA Qualified Beneficiaries
DOL dedicated subsidy website – This site currently includes a section for workers and families, featuring the DOL’s COBRA Premium Assistance under the American Rescue Plan Act of 2021 FAQs and General COBRA FAQs for Workers
ProBenefits blog post: ARPA COBRA Subsidy Update 4/7/21
ProBenefits blog post: American Rescue Plan Act Includes 100% COBRA Subsidy
Frequently Asked Questions
Q: What is the ARP COBRA subsidy?
A: The American Rescue Plan Act of 2021, or ARP, signed by President Biden on March 11, 2021, provides temporary premium assistance for COBRA continuation coverage. Premium assistance is provided in the form of a 100% COBRA subsidy. The COBRA subsidy is available to certain individuals who are eligible for COBRA continuation coverage due to a qualifying event that is a reduction in hours or an involuntary termination of employment.
If you qualify for premium assistance, you will not be required to make any COBRA premium payments that would otherwise be owed for ongoing group health plan coverage during the months in which premium assistance applies. In other words, your plan coverage will be free of charge for a certain period of time.
The premium assistance is available from April 1, 2021 through September 30, 2021.
Q: Is it ARP or ARPA?
A: Good question! While the initial consensus in the industry was ARPA (American Rescue Plan Act), it appears that the DOL is now going with the acronym ARP instead. So, when you see reference to the ARPA COBRA subsidy or the ARP COBRA subsidy, they’re the same thing. Here at ProBenefits, we’re moving toward using ARP, but you may still see earlier information that references ARPA.
Q: Who is eligible for the ARP COBRA subsidy?
A: Only Assistance Eligible Individuals (AEIs) may receive the subsidy. The ARP defines an AEI as a COBRA qualified beneficiary (QB) who:
- Lost plan coverage due to a reduction in hours or an involuntary termination of employment; and
- Is eligible for COBRA during any portion of the period of April 1, 2021 through September 30, 2021; and
- Elects COBRA.
Q: Which terminations are considered to be involuntary terminations of employment?
A: Whether an individual has experienced an involuntary termination of employment is a facts and circumstances test. The IRS has stated that the following terminations of employment will be considered involuntary:
- A termination “for cause” (other than a termination for gross misconduct);
- A resignation due to a material change in the geographic location of employment;
- Participation in a window program under which employees with upcoming terminations are offered a severance package; and
- An employee-initiated termination in response to an involuntary material reduction in hours.
The IRS has also suggested that the following terminations of employment may be considered involuntary:
- The employer’s failure to renew an employment agreement or similar contract, if the employee is otherwise willing and able to continue employment;
- Ending employment while the employee is absent due to illness or disability, when there was a reasonable expectation that the employee would return to work after the illness or disability subsided;
- An employee-initiated termination for good cause (due to employer action that results in a material negative change in the employment relationship); and
- A “retirement” when the employee is willing and able to continue employment but knows of the impending termination absent retirement.
Q: How does the subsidy program work?
A: AEIs will be able to take advantage of the subsidy in one of the following ways, depending on their current status:
- Eligible individuals who have a COBRA election in place as of April 1, 2021, will be able to take advantage of the subsidy effective April 1, 2021.
- Eligible individuals who do not have a COBRA election in place (but were previously offered COBRA under federal law) will have another opportunity to elect COBRA, and may begin receiving the subsidy effective April 1, 2021.
- Eligible individuals who experience a COBRA qualifying event between April 1, 2021 and September 30, 2021, will be eligible for the subsidy while it is in effect.
Q: What types of coverage are subject to the ARP COBRA subsidy?
A: The subsidy will pay for COBRA coverage under medical, dental, vision, HRA (health reimbursement arrangement), and EAP (employee assistance plan) benefits. Although FSAs (flexible spending accounts) are subject to COBRA, the premium assistance under the ARP is not available for FSA coverage.
Q: Will the subsidy apply to retiree health coverage?
A: If retiree health coverage is offered under the same group health plan as the coverage that is available to similarly situated active employee, the subsidy will be available to AEIs who elect retiree coverage, as long as the amount otherwise charged for retiree coverage does not exceed the maximum permissible charge for COBRA coverage.
Q: If I meet the eligibility requirements described above, will I definitely receive the subsidy?
A: Not necessarily. You will be disqualified from receiving the subsidy if:
- Your plan coverage was lost due to a termination of employment for gross misconduct;
- You are eligible for other group health plan coverage (such as through a new employer’s plan or a spouse’s plan), even if you are not enrolled in such coverage; or
- You are eligible for Medicare, even if you are not enrolled in such coverage.
Q: What if I am eligible for or enrolled in Medicaid or Marketplace coverage?
A: Your eligibility or enrollment in such coverage will not make you ineligible for the subsidy. However, if any premium tax credit, advance payment of the premium tax credit, or health insurance tax credit is otherwise available to you, it will not be available during the period for which you receive COBRA premium assistance. You will be required to pay back any tax credits you received for any month during which you also received COBRA premium assistance.
Q: It looks like I satisfy the eligibility requirements and am not disqualified under the rules described above. How do I begin receiving subsidized (free) COBRA coverage?
A: You will receive some information in the mail from ProBenefits containing details about the ARP COBRA subsidy. One item you will receive is an AEI 2021 Subsidy Eligibility Attestation Form (the “Attestation Form”). You will need to read the Attestation Form, sign it to confirm that you meet all the eligibility criteria, and mail it back to ProBenefits at:
2634 Reynolda Road
Winston Salem, NC 27106
If you are not already participating in COBRA, you will also receive a COBRA election form. You will also need to complete and return the COBRA election form by mail to ProBenefits, along with the Attestation Form. ProBenefits will then verify your eligibility and, if confirmed, begin your subsidized coverage. You will receive a subsidy confirmation letter once your coverage is in place.
Q: How soon must I take action after I receive information in the mail?
A: You must return the Attestation Form and your COBRA election form (if applicable) within 60 days of your receipt of the mailed materials in order to receive the subsidy. However, we encourage you to return the completed forms as soon as possible.
[Note: If your employer is offering COBRA coverage under a different plan, as an alternative to the plan that previously covered you, you may have a 90-day period to complete and return your forms. If that is the case, the information you receive will inform you of the 90-day period.]
Q: I just received the subsidy information in the mail. What if I have already made a COBRA payment for April, May or June?
A: If you are entitled to receive the subsidy for any period of coverage for which you have already paid your COBRA premium, you will receive a refund of the applicable premium payments(s).
Q: What is the purpose of the Attestation Form?
A: The Attestation Form is designed to confirm whether you are, in fact, an AEI and to confirm that you are not eligible for other coverage that would disqualify you from receiving the subsidy.
Q: What if I was not eligible for other group health plan coverage or Medicare on April 1, 2021, but become eligible for such coverage after I submit the Attestation Form (or after April 1, 2021)?
A: You must promptly notify your employer, group health plan or health insurance carrier if you become eligible for other group health plan coverage (such as through a new employer’s plan or a spouse’s plan) or for Medicare, even if you do not enroll in such coverage. If you fail to do so, you may be required to pay a tax penalty.
Q: Does the ARP extend the length of time I can receive COBRA coverage?
A: No. The duration of COBRA coverage (typically 18 months from the loss of plan coverage, but subject to extension due to disability or a second qualifying event) continues to apply. For example, if your COBRA coverage period would otherwise end on July 31, 2021, which is prior to the end of the subsidy period (September 30th), both your COBRA coverage and the subsidy will end on that date.
Q: I didn’t elect COBRA when I first became eligible, but I am still within the 18-month period to which COBRA would have applied (if I had elected COBRA). Am I eligible for the subsidy?
A: Maybe. If you lost plan coverage due to a reduction in hours or an involuntary termination of employment and your employer was subject to the federal COBRA requirements at that time (rather than state law continuation of coverage requirements), you will have another opportunity to elect COBRA, and you may be entitled to receive the subsidy (free coverage) during the period of April 1, 2021 through September 30, 2021 (or through the last day of your COBRA coverage period, if your 18-month COBRA coverage period expires sooner).
The additional opportunity to elect COBRA (and to receive the subsidy) applies to all of the health benefit programs in which you were participating at the time you lost coverage (such as medical, dental, vision, HRA, and EAP), except for any health FSA plan. It also applies if you elected COBRA for some benefits but not others. Finally, the additional opportunity also applies to your family members who were covered under any of the health benefit programs at the time you lost coverage.
[Note: Your COBRA election at this time will not provide plan coverage that is retroactive to the date of your COBRA qualifying event (the date you lost plan coverage). However, you may also be eligible to elect retroactive coverage (at standard COBRA rates) that applies to the time period between your COBRA qualifying event and the date your subsidy begins. More information relating to these COVID relief provisions can be found here.
Q: I elected COBRA when I first became eligible but later dropped it (or allowed it to lapse by missing a premium payment). If I am still within the 18-month period to which COBRA would have applied (if I hadn’t dropped COBRA or failed to pay for it), am I eligible for the subsidy?
A: Maybe. Please see the Q&A above.
Q: What happens to my COBRA coverage after the subsidy period ends on September 30, 2021?
A: You will receive a subsidy expiration notice roughly 30 days before the end of your subsidized coverage. If you have not reached the end of your COBRA coverage period when the subsidy expires, your COBRA coverage will automatically continue. However, your applicable COBRA premium payment must be made by the end of the grace period following the premium due date in order to avoid losing coverage. If you fail to make timely payment, your coverage will be terminated. Such termination of coverage will be retroactive to the day following the subsidy expiration date.
The subsidy expiration notice will provide you with information relating to other health plan coverage options that may be available to you, such as Marketplace coverage.