The American Rescue Plan Act (ARPA) includes new Federal mandates that may impact your business and formerly full-time employees. The new law provides tax credits for the full cost of COBRA or State Continuation coverage for certain individuals. Employers have requirements to notify qualified individuals of eligibility for the subsidies. Below is an FAQ related to the new subsidies.
Who is eligible for the ARPA COBRA Subsidies?
Employees that have lost group medical coverage due to a reduction of hours OR an involuntary job loss. 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.
Are former full time employees that previously declined/discontinued COBRA or State Continuation coverage eligible?
Yes. Any individual that could still be enrolled had they elected coverage (typically 18 months) is eligible to begin coverage effective April 1, 2021. This means employees that had lost coverage going back to October 2019 may be eligible for ARPA subsidized COBRA coverage.
What is the duration of the ARPA Subsidies?
The subsidies will begin April 1, 2021 will continue through at least September 30, 2021. This period does not extend an individual’s coverage period for those who lost coverage 12+ months ago.
Who pays for the COBRA or State Continuation Coverage?
Employers that are subject to federal COBRA laws (generally 20 or more employees) are required to pay for qualified participants COBRA coverage to the insurance company (or self-funded plan) but can take a credit for the full cost of the coverage on a quarterly payroll tax. This credit is fully refundable and there are options to take the credit in advance.
Qualified participants of employers with fewer than 20 employees that offer medical coverage will have a State Continuation coverage option that the insurance carrier will not bill for and the carrier would submit tax credits for.
What lines of coverage are eligible for the ARPA subsidies?
Medical, Dental and Vision coverage. FSAs and QSEHRAs are specifically excluded.
What are the employers’ responsibilities?
In addition to proper administration of the COBRA elections, employers are required to comply with the ARPA’s Notice Requirements which include notifying eligible individuals (including those that previously declined COBRA coverage) of the free coverage availability. Eligible individuals have 60 days from receiving the notice to elect coverage. We are awaiting a Model Notice from the Department of Labor but in the meantime the attached spreadsheet may be helpful in gathering information that will be necessary for sending the Notices to the eligible participants that lost Medical, Dental or Vision coverage due to a reduction of hours or an involuntary termination sometime since October 1 of 2019. Employers will also be required to notify employees that elect coverage when the free coverage will expire.
Will my COBRA vendor assist with the notices?
Most Vendors are preparing to assist with the ARPA subsidy notices but the vendor will likely need assistance in knowing which former employees are eligible.
Below you can find a further overview of the ARPA COBRA Subsidies:
The template link below ” Tracking ARPA COBRA Eligibility” may be helpful for collecting information for those that may be ARPA COBRA Subsidy eligible. We encourage you to download the template for collecting this important information as it pertains to your business
We are awaiting the Model Notices from the Department of Labor, as well as some further guidance on the rules surrounding the new COBRA subsidies, but we felt it necessary to provide pertinent information to you. We intend on sending a further updates as more information becomes available.
As always, your Team at Acentria Insurance is here to help! Please feel free to reach out with any questions or concerns. Thank you for the continued opportunity to serve you & your company.