COBRA Subsidies Under New COVID-19 Relief Legislation, the America Rescue Plan Act of 2021

By John Welsh and Martha J. Zackin

The American Rescue Plan Act of 2021 (“ARPA”), signed into law on March 11, 2021, provides fully subsidized health care continuation coverage to certain individuals.  These “assistance-eligible individuals” or “AEIs,” include workers and their dependent family members who lost group health insurance coverage due to involuntary employment termination or reduction in hours, whether or not occasioned by the COVID-19 pandemic.  The subsidy applies to group health insurance plans subject to the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) or comparable state continuation coverage.  Employers subject to COBRA are those with at least 20 employees on more than 50 percent of its typical business days in the previous calendar year; smaller employers in states with “mini-COBRA” laws, such as Massachusetts, must also provide continuation coverage.  The subsidy applies to health, dental, and/or vision insurance premiums; health flexible spending arrangements are not eligible for subsidies.  The subsidy is not available to individuals who lost coverage for any reason other than those set forth above.

The subsidy is available for the six-month period from April 1 through September 30, 2021 only.  Eligibility for the subsidy terminates if the AEI becomes eligible for other group health plan coverage or Medicare. AEIs are subject to penalties of up to 110% of the subsidy if they fail to notify the group health plan when they become eligible for other health care coverage.  AEIs are not eligible for subsidies if coverage was lost due to employment resignation, termination for gross misconduct (which is a very high burden to meet), or other qualifying event (such as death of the covered employee, divorce, or legal separation). Read more