Apr 20, 2021
On March 11, 2021, the American Rescue Plan Act of 2021 (ARPA) was signed by President Biden and includes a provision for a COBRA continuation coverage premium subsidy of 100% for individuals and families who experienced involuntary job loss or a reduction in hours of work leading to a loss in coverage.
This subsidy will be available for assistance eligible individuals (AEIs), as defined under the Act, from April 1, 2021, through September 30, 2021. Individuals who qualify may sign up with their former employer, who will be reimbursed through tax credits for the complete premium for the months the eligible individual is covered between April 1 through September 30, 2021. The following requirements apply:
- Coverage was lost due to involuntary job loss or a reduction in hours of work.
- The COBRA participant is still within the COBRA eligibility period as of April 1, 2021, or elected COBRA and discontinued it prior to April 1, 2021.
- The COBRA qualified individual is not eligible for coverage under another group plan or Medicare.
- Eligible COBRA participants who do not have an election in place but are eligible will have the opportunity to elect coverage and take advantage of subsidy.
- The ARPA will not extend the normal 18-month period of COBRA continuation coverage in the case of job loss or a reduction in hours.
UnitedHealthcare has added FAQs on COBRA subsidy to their COVID-19 FAQ.
How the Advance Premium Works
| PLAN TYPE | ADVANCES PREMIUM FOR COBRA ASSISTANCE ELIGIBLE INDIVIDUAL | GOVERNMENT TAX CREDIT FOR PREMIUM ADVANCED |
|---|---|---|
| Multiemployer/Taft Hartley | Awaiting additional clarification from the Treasury | Awaiting additional clarification from the Treasury |
| Fully insured and self-funded group plans subject to Federal COBRA | The employer advances the premium | The employer takes the tax credit |
| Small self-funded employer group plans (All Savers/level funded) | The employer advances the premium | The employer takes the tax credit |
| Fully insured group plans not subject to COBRA, but subject to state continuation | The insurer advanced the premium | The insurer takes the tax credit |
Summary of COBRA Subsidy Tax Credit
The American Rescue Plan Act states:
- If the plan is fully insured or self-funded and subject to Federal COBRA, then the employer gets the tax credit.
- If the plan is a small self-funded group plan, the employer takes the tax credit.
- If the plan is fully insured and not subject to Federal COBRA, but is subject to state continuation, the insurer takes the tax credit.
Note: Brokers and employers will be notified if/when Multiemployer/Taft Hartley guidance is released. Additionally, employers are permitted, but not required, to allow assistance eligible individuals to change elections to other plan options that have the same or lower cost premiums.
Within 60 days of the April 1, 2021, applicability date, employers will be required to update COBRA notices sent to the assistance eligible individuals to describe the subsidy and to issue extended COBRA election notices. Employers must also provide a notice of expiration prior to premium subsidy expiration.
Support for the employer groups UHCBS administers
For employers with UnitedHealthcare-administered COBRA plans, UHCBS will incorporate the language into the standard COBRA Election Notices through September 30, 2021, once the Department of Labor releases model notices.
Upon request, UHCBS will provide the employers a list of individuals who had a qualifying event and are still within their period of eligibility. Employers must inform UHCBS of the individuals with an involuntary termination. This information is needed for the individual to be eligible for the federal subsidy. The employer will also be required to certify that the information is accurate and agree to contact the COBRA administrator if information changes.
UnitedHealthcare will keep brokers and members informed if/when changes or additional guidance is released by the DOL, HHS and Treasury.
