COBRA Subsidy Provisions of the American Rescue Plan Act

The American Rescue Plan Act (ARPA), signed into law March 11, 2021, provides a 100% subsidy of premiums for employer-sponsored group health insurance continued under the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) and similar state continuation of coverage (mini- COBRA) programs.

ARPA subsidies cover the full cost of COBRA or mini-COBRA premiums from April 1, 2021, through Sept. 30, 2021, for employees (and their qualifying family members), if the employee lost or loses group health insurance due to an involuntary job loss or reduction in work hours. The subsidy applies to people who are still within their original COBRA or mini-COBRA coverage period, for the length of that coverage period, even if they declined or dropped COBRA or mini-COBRA coverage earlier.

The subsidy does not apply to:
 Individuals whose job loss was voluntary or the result of gross misconduct; or
 Individuals who are eligible for another group health plan or Medicare.

The subsidies are funded through a payroll tax credit. Employers are required to provide new notices about the subsidy to employees. The U.S. Department of Labor (DOL) will issue model notices for this purpose.

Highlights

Eligible Individuals

The subsidy is generally available to
people who elected COBRA, become
eligible for COBRA, or declined or
discontinued COBRA and are still
within their original COBRA coverage
period.

Funding

The subsidy is funded by a refundable,
advanceable credit against payroll
taxes are taken by employers or carriers.

Option to Switch Coverage

The ARPA allows covered individuals to
switch to similarly priced health
coverage, if the employer allows it.

Important Dates

April 1, 2021
ARPA 100% subsidy begins to cover COBRA premiums.
Sept. 30, 2021
ARPA subsidy provision for COBRA premiums expires.

Download the full PDF here – COBRA Subsidy Provisions of the American Rescue Plan Act

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