1. What is the Federal COBRA subsidy?

ARPA’s COBRA subsidy requires the federal government to provide “assistance eligible individuals” (AEI) with a 100% subsidy for COBRA premiums (including the administrative fee) otherwise owed for COBRA coverage during the period from April 1, 2021 to September 30, 2021 (subsidy period). The subsidy will be applied to Medical, Dental and Vision coverage.

2. Who is eligible for the subsidy? Am I an Assistance Eligible Individual (AEI)?

Assistance Eligible individuals (AEI) are eligible for the subsidy.  An AEI is a qualified beneficiary who during the period of COBRA coverage of April 1, 2021 – September 30, 2021 (1) has a qualifying event which is an involuntary termination of employment or reduction of hours, (2) is not otherwise eligible for Medicare or other group health plan coverage, and (3) who actually elects COBRA coverage. Please note there are some additional considerations below:

  • An involuntary termination is when an employee is let go because of a business decision that is outside of their control; the employee had no control over the situation. The IRS/DOL will provide more specific guidance in the near future.
  • An individual who voluntarily terminates from employment is not eligible for the COBRA subsidy. TRI-AD is awaiting additional guidance from the IRS/DOL on what constitutes an involuntary termination of employment for these COBRA subsidies.
  • An AEI includes both employees/former employees and their dependents covered under a health plan (a covered spouse and/or dependent child(ren) who become qualified beneficiaries at the time of the COBRA qualifying event).
  • Once the AEI’s maximum COBRA coverage period ends, the COBRA subsidy also ends (i.e., the new law does not extend an AEI’s maximum COBRA coverage period).
  • An AEI can be someone who first becomes eligible for COBRA coverage on or after April 1, 2021. However, an AEI is also someone who had a COBRA qualifying event before April 1, 2021, and whose maximum COBRA coverage period overlaps with the subsidy period. See the next question for more information.
3. If I never elected COBRA or stopped paying for COBRA coverage, am I eligible for the subsidy?

There is a special election period for those who were previously eligible for COBRA and either didn’t enroll or stopped payments. This special election period will be applicable for those who would have been eligible for COBRA should they have enrolled or made payments during the subsidy period April 1, 2021 – September 30, 2021.

This special election opportunity begins 60 days after the newly required subsidy notice is provided, as described below.

If you newly elect COBRA coverage during the special election window, you are entitled to the COBRA subsidy on a prospective basis beginning April 1, 2021, without having to elect and pay for COBRA coverage retroactively for any months prior to the subsidy period.

5. Can an AEI elect a different medical plan option?

Generally, an AEI who becomes eligible for COBRA coverage can only elect the plan option that the individual was enrolled in when they experienced the COBRA qualifying event. Under ARPA, an employer may, but is not required to, allow qualified beneficiaries to make a limited change to the medical plan coverage (not dental or vision) they were enrolled in at the time of their qualifying event if the premium for the other coverage is the same price or cheaper than the coverage in effect at the time of the qualifying event. A qualified beneficiary must make the election to change the medical plan coverage within 90 days after the date of notice of the enrollment option. If the employer decides to allow the change in your medical plan, more information will be provided to you in the subsidy notice you will receive if you are an AEI.

6. Can I lose the subsidy earlier than the 6-month expiration period?

COBRA participants lose the subsidy earlier than September 30, 2021 under the following circumstances:

  • Your COBRA coverage expires at the end of 18 months of COBRA coverage (or 29 months for disability or 36 months for second qualifying events)
  • You become eligible under:
    • Other group health plan (other than a health FSA, an excepted benefit such as a dental or vision plan, or a Qualified Small Employer Health Reimbursement)
    • Medicare
  • Eligibility for another group health plan or Medicare means you are eligible to enroll, even if you do not enroll
7. What happens if I fail to notify TRI-AD or my employer (former employer) of my eligibility for another group health plan or Medicare?

A penalty applies if you fail to notify TRI-AD (or your employer) of your eligibility for other plans. The penalty amount is $250 for each failure and if the failure was intentional, the penalty will increase to 110% of the subsidy paid after your subsidy eligibility terminated.

8. I’m currently on COBRA, should I keep paying my premiums or will the subsidy pay now?

If you are a current COBRA participant and paying your monthly premiums, please continue to pay your premiums to ensure your coverage is not terminated. TRI-AD is currently working to finalize our processes and approach to support and administer the subsidy. The subsidy is effective April 1, 2021- September 30, 2021 and any payments made to TRI-AD for this period will be refunded to you if you are eligible for the subsidy.

9. What is the Impact of a Second Qualifying Event on the Subsidy?

This question is currently not addressed in the law. We are waiting for additional guidance from the IRS/DOL to provide clarity.

10. Does the subsidy also apply to ex-spouses who were dropped due to divorce or to a dependent who aged out?

The subsidy is not applicable to a Qualified Beneficiary who is on COBRA due to a divorce or dependent age limit qualifying event. To be eligible for the subsidy, the COBRA qualifying event must be an involuntary termination or a reduction in hours.

We are awaiting further guidance from the IRS/DOL as to whether a spouse or dependent who enrolled in COBRA due to an employee’s involuntary termination or reduction in hours and subsequently experiences a secondary qualifying would be eligible for the ARPA subsidy.

11. I was eligible for COBRA last year but now have a new job offering health insurance. Am I eligible for the subsidy?

No. Any individual that has access to coverage via another group health plan is not eligible for the subsidy. Even if you are not currently enrolled in the group health plan, you do have coverage available to you and therefore, you are not eligible for the COBRA subsidy.

12. If I am eligible for Medicare, am I eligible for the subsidy?

No. Because you are eligible for Medicare, you are not eligible for the COBRA subsidy.

14. If I’m eligible for the subsidy and want to enroll now for coverage but have not received the notice in the mail, what should I do?

There is nothing for you to do at this time. TRI-AD is currently confirming with your employer (or former employer) that you were involuntarily terminated or your hours were reduced. Once TRI-AD has confirmation, a notice will be sent on or before May 31, 2021 to those who are believed to be AEIs. You will need to confirm that you are an AEI based on your current circumstances. For example, if you have been employed and have group health coverage, you are not eligible for COBRA or the subsidy.
If you do not receive a notice from TRI-AD, there will be a way you may appeal the determination, but additional guidance is needed from the DOL and IRS about this appeal process. 

15. Where can I find more information about the COBRA subsidy?

The US Department of Labor (DOL) has developed FAQs for the COBRA subsidy.  Click this link https://www.dol.gov/ to access their FAQs.

Please check back here regularly as we will update this page as we receive new information and guidance.

TRI-AD and our Associates’ suggestions or recommendations shall not constitute legal advice. No content on our website can be construed as tax or legal advice and TRI-AD may not be considered your legal counsel or tax advisor. Clients are encouraged to consult with their tax advisor and/or attorney to determine their legal rights, responsibilities, and liabilities. This includes the interpretation of any statute or regulation, federal, state or local; and/or its application to the clients’ business activities.