The ARPA and COBRA: What Does the COBRA Subsidy Mean for Your Business

What Employers Need to Know About the American Rescue Plan Act
May 10, 2021
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The ARPA and COBRA: What Does the COBRA Subsidy Mean for Your Business

We recently reviewed the American Rescue Plan Act (ARPA) and how it impacts workforce management and the implementation of COVID-19 workplace policies and procedures. However, the impact of the ARPA doesn’t end there. In addition to the extension and expansion of payroll tax credits and EMFLA leave, the ARPA includes a COBRA Premium Assistance provision subsidizing the full COBRA premium for “Assistance Eligible Individuals.”

Who are “Assistance Eligible Individuals”? And what does the COBRA subsidy mean for your business? The HR experts at Synergy are here to help you break down the COBRA provision and its impact.

The COBRA Premium Assistance Provision

Before we look into the ARPA provision, let’s start with a brief summary of what COBRA is and who it impacts. The Consolidated Omnibus Budget Reconciliation Act of 1985, otherwise known as COBRA, provides continuation of health care for participants and beneficiaries after a qualifying life event such as termination of employment or a reduction in hours that causes loss of health coverage. In these circumstances, the individual affected may be able to elect COBRA continuation coverage. Individuals with this right are referred to as qualified beneficiaries, and employers are required to notify those who are eligible regarding their COBRA options.

Under Section 9501 of the APRA, COBRA premium assistance is provided to help Assistance Eligible Individuals continue their health coverage and benefits. This assistance applies not only to federal COBRA coverage but also to state programs that offer similar coverage continuation. According to this provision, premium assistance applies to periods of health coverage from April 1st to September 30th, 2021. Assistance Eligible Individuals are not required to pay their COBRA continuation coverage premiums during this time and employers or health plans to whom COBRA is usually payable are entitled to a tax credit for the amount of the premium assistance.

Who is an “Assistance Eligible Individual”?

COBRA premium assistance is available to qualified beneficiaries who meet the following requirements from April 1, 2021 to September 30, 2021:

  • Is eligible for COBRA continuation coverage due to a qualifying life event such as:
    • Reduced hours due to a change in a business’s hours of operation
    • A change from full-time to part-time employment status
    • Taking a temporary leave of absence
    • Involuntary termination of employment
  • Elects COBRA continuation coverage
  • Is NOT eligible for Medicare
  • Is NOT eligible for coverage under any other group health plan

If an Assistance Eligible Individual elects COBRA continuation coverage with premium assistance and later becomes eligible for other health plan coverage, they must notify the health plan or risk a fine. At the same time, employers that fail to satisfy COBRA continuation coverage requirements may also be investigated and fined by the Department of Labor.

What the COBRA Subsidy Means for Business

If you are an employer or business, the COBRA provision of the APRA has several implications. First, health plans and issuers must notify qualified beneficiaries and Assistance Eligible Individuals regarding the premium assistance provided by the ARPA. This notice can be provided as part of the COBRA election notice or can be issued separately.

The provision also requires that health plans and issuers provide individuals with a notice of expiration alerting them that the premium assistance will expire. This must be provided 15 to 45 days before the expiration of assistance. For more details on what information the notices need to include, check out the COBRA Premium Assistance FAQ.

Last, COBRA premium assistance coverage under the ARPA is funded by a tax credit, allowing “persons to whom premiums are payable” to claim a tax credit for the full COBRA premium. For more information regarding the tax credit and its implications for your business, reach out to your Synergy HR expert.

Want to learn more about the COBRA premium assistance provision of the ARPA? Get in touch with Synergy today.

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