Understanding COBRA subsidies in the American Rescue Plan Act
April 23rd, 2021
From Blue Shield of California
The American Rescue Plan Act (ARPA), signed on March 11, 2021, is a $1.9 trillion economic relief bill in response to the ongoing COVID-19 pandemic. A key component of this Act is a COBRA subsidy for qualifying individuals as outlined under Section 9501 Preserving Health Benefits for Workers.
Under this provision, a temporary subsidy is being offered to offset the cost of COBRA (and Cal-COBRA) coverage for qualifying individuals who have lost employer-sponsored health coverage due to involuntary termination or reduction in hours.
For qualifying coverage months between April 1, 2021 and September 30, 2021, assistance-eligible individuals will be required to pay $0 for COBRA/Cal-COBRA premiums. Plan sponsors are generally required to fund the premium subsidy but will be able to recover the cost through a quarterly payroll tax credit. For Federal COBRA coverage, employer groups will be able to recover 100% of the subsidy, including the applicable 2% COBRA administrative fee, through a refundable payroll tax credit.
Individuals who experienced a qualifying loss of coverage and have not yet exhausted available COBRA continuation coverage, based on the original event date, may be eligible to enroll effective April 1, 2021 with this subsidy – even if they are not currently enrolled in COBRA coverage.
This subsidy program requires plan sponsors and their COBRA administrators to notify potentially eligible individuals of their ability to elect the COBRA subsidy. For Cal-COBRA coverage, Blue Shield will send election notices to all potentially eligible individuals. This notice will include additional details on subsidy criteria and provide information on how qualified individuals can enroll. For Federal COBRA coverage, the employer group or COBRA TPA is responsible for sending election notices to potentially eligible individuals.
To learn more about the COBRA subsidy and eligibility information, please visit Blue Shield of California’s resource page will find additional details, FAQs, and copies of the notices for eligible employees.