COBRA Premium Assistance: What NAIFA Members Need to Know

In March, Congress passed the American Rescue Plan (ARP) Act, which included provisions that provide 100% COBRA subsidies from April 1 through September 30 of 2021.

The ARP provides for COBRA premium assistance to help Assistance Eligible Individuals continue their health benefits. Assistance Eligible Individuals are not required to pay their COBRA continuation coverage premiums, and this assistance applies to periods of health coverage on or after April 1, 2021, through September 30, 2021. An employer or plan to whom COBRA premiums are payable is entitled to a tax credit for the amount of the premium assistance. Premium assistance is also available for continuation under certain state laws. 

Overview for individual clients

An Assistance Eligible Individual is a COBRA qualified beneficiary who meets the following requirements during the April 1 through September 30, 2021 time period: 

• Is eligible for COBRA continuation coverage by reason of a qualifying event that is a reduction in hours (such as reduced hours due to change in a business’s hours of operations, a change from full-time to part-time status, taking of a temporary leave of absence, or an individual’s participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced) or an involuntary termination of employment (not including a voluntary termination); and
• Elects COBRA continuation coverage.

Employees who lost coverage as of April 2020 may also be eligible for COBRA premium assistance because those employees’ 18-month COBRA period overlaps with the April 1 through September 30, 2021 time frame.

COBRA premium assistance is also available to employees who did not elect COBRA coverage during the original election period and those who initially elected COBRA but allowed coverage to lapse. Individuals who meet these criteria must be offered an additional 60-day period to elect COBRA coverage and will not be required to pay retroactive premiums to the original loss-of-coverage date.

Individuals are not, however, eligible for COBRA premium assistance if they are eligible for other group health coverage, such as through a new employer’s plan or a spouse’s plan (not including excepted benefits, a qualified small employer health reimbursement arrangement (QSEHRA) or a health flexible spending arrangement (FSA)) or if they are eligible for Medicare. Additionally, individuals are not eligible for COBRA continuation coverage or premium assistance if they were terminated for gross misconduct.

It should be noted that those who have individual health insurance coverage — like a plan through the Health Insurance Marketplace or if they have Medicaid – may be eligible for ARP premium assistance.

Individuals who do enroll in COBRA premium assistance will no longer be eligible for a premium tax credit, advance payments of the premium tax credit or the health insurance tax credit for their health coverage during that period.

Premium assistance for eligible individuals will last from April 1 through September 30, 2021. However, assistance will end earlier if they:

• Become eligible for another group health plan, such as a plan sponsored by a new employer or spouse’s employer (not including excepted benefits, a QSEHRA or a health FSA) or they become eligible for Medicare, or
• Reach the end of their maximum COBRA continuation coverage period.

Individuals who opt to continue COBRA continuation coverage after the premium assistance period may have to pay the full amount of the premium otherwise due.

When your individual client’s COBRA premium assistance coverage ends, they may be eligible for Medicaid or a special enrollment period to enroll in coverage through the Health Insurance Marketplace or to enroll in individual market health insurance outside of the Marketplace. A special enrollment period is also available when they reach the end of their maximum COBRA coverage period.

Overview for business clients

The ARP creates the following notice requirements for plan administrators:

• A general notice to all qualified beneficiaries who have a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021, through September 30, 2021. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
• A notice of the extended COBRA election period to any Assistance Eligible Individual (or any individual who would be an Assistance Eligible Individual if a COBRA continuation coverage election were in effect) who had a qualifying event 6 before April 1, 2021. This requirement does not include those individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (generally, those with applicable qualifying events before October 1, 2019). This notice must be provided within 60 days following April 1, 2021 (that is, by May 31, 2021).

Plan administrators are also required to provide individuals with a notice of expiration of periods of premium assistance explaining that the premium assistance for the individual will expire soon, the date of the expiration and that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan. Coverage may also be available through Medicaid or the Health Insurance Marketplace. This notice must be provided 15 - 45 days before the individual’s premium assistance expires.

For more information on COBRA premium assistance, model notices and Frequently Asked Questions (FAQs) click HERE.