The American Rescue Plan Act and COBRA Assistance in Maine

Congress passed The American Rescue Plan Act (ARPA) and it was signed into law on March 11, 2021. Included as part of the sweeping legislation is a program to fully subsidize COBRA coverage for six months starting in April of 2021.

ARPA creates a new 100% subsidy for COBRA premiums from April 1, 2021, through September 30, 2021. Additionally it opens up the ability to enroll in COBRA coverage even if you declined coverage earlier or if your enrollment window has closed.

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) included a provision that allowed a person who loses employer-sponsored coverage to remain in that coverage if they elect to pay the full premium amount, plus an administrative fee of two percent. As a result, for many, the cost of continuing their coverage through COBRA is sometimes more expensive then what can be purchased through Maine’s Health Insurance Marketplace if you qualify for Obamacare subsidies. You qualify for COBRA coverage if your employment is terminated for any reason other than gross misconduct, or if your hours are reduced. Family members of the employee also qualify for COBRA coverage along with the employee or in the event of the death of the employee, divorce, or if the employee gains eligibility for Medicare.

The law dictates that employees and other beneficiaries must be provided notice of COBRA rights for continuation of coverage and the plan must be notified of a qualifying event to trigger a COBRA election notice.You generally have 60 days to enroll in COBRA coverage after the qualifying event. Generally, COBRA coverage can be maintained for 18 months, unless the COBRA coverage is due to the employee’s qualification for Medicare, which provides 36 months of coverage. [Read more]

COBRA generally applies to employers with 20 or more employees. Maine has a state continuation of coverage program for employees that are not protected by COBRA, called mini-COBRA. [Read more about Maine’s Mini-COBRA]

The American Rescue Plan Act and COBRA Assistance

1. ARPA creates a new 100 percent subsidy for COBRA coverage premiums from April 1, 2021, through September 30, 2021.

2. Additionally, ARPA opens up the ability to enroll in COBRA coverage even if you declined coverage earlier or if your enrollment window closed.

3. Finally, ARPA extends the subsidy to continuation coverage under state mini-COBRA requirements as well.

Subsidy structure and operation. The COBRA assistance program is designed to be generally invisible to the enrollee. The language from ARPA reads: “In the case of any premium… for COBRA continuation coverage with respect to any assistance eligible individual described in paragraph (3), such individual shall be treated for purposes of any COBRA continuation provision as having paid in full the amount of such premium.” Enrollees that are eligible are deemed to have paid their premium. The assistance is accessed by plan sponsors or insurance companies as a refundable tax credit against payroll taxes. This allows 501(c)(3) organizations to access the assistance credits. The Department of Labor will provide guidance on identifying assistance-eligible individuals.

New COBRA election opportunity. ARPA also allows individuals who would have been eligible to enroll in COBRA coverage but did not enroll, as well as those who enrolled in COBRA but then unenrolled, to join (or re-join) COBRA coverage. However, no one can join coverage if their COBRA coverage window (either 18 or 36 months from their qualifying event) has passed. Also, coverage cannot extend beyond the original 18 or 36 month window. Plan administrators or insurance companies will be required to provide notice to those eligible for the new election opportunity by May 30, 2021.

State continuation of coverage programs (mini-COBRA). The COBRA Assistance program of ARPA is explicitly available for state continuation of coverage programs, also called mini-COBRA. These programs are generally available to employees of small employers (fewer than 20 employees) or other entities not subject to COBRA. Mini-COBRA programs, however, are not uniform across states, and include different election windows, notice requirements, and coverage eligibility categories.

Limitations. COBRA coverage allows for plan enrollment for anyone whose employment is terminated except for the reason of gross misconduct. The ARPA COBRA Assistance program limits assistance to those eligible for COBRA, unless the eligibility was due to the voluntary termination of employment by the employee.[ix] Also, COBRA is only available if the employer is still offering a health plan. ARPA allows for enrollment in the employer plan if it changed, but if the employer is closed, and no health plan is offered, there is no opportunity for COBRA enrollment. COBRA assistance does not apply to Health Reimbursement Accounts (HRAs) which some employers use to allow their employees to purchase their own coverage.

Limited time for COBRA Assistance. The COBRA Assistance program provides six months (April – September, 2021) of coverage subsidy. On October 1, there could be a bolus of newly uninsured and as it stands now, there is no Special Enrollment Period (SEP) for persons who choose to end COBRA coverage because of unaffordability.  So, you will have to pay the full COBRA premiums for the remaining 3 months of the year until you can get a more affordable plan on the Marketplace. [Click here to see plans and compare costs.]

Increased assistance for Marketplace coverage. ARPA also significantly increases the financial assistance available to consumers on the Marketplace. Not only are there additional subsidies to cap the cost of health insurance at 8.5 percent of income, the amount of income lower-income individuals are expected to pay towards premiums is also lowered. That means families up to 150 percent of the federal poverty level will have access to $0 premium plans and other income levels will see significant premium reductions. ARPA also provides $0 premiums for the so-called “high value silver” plans, with significantly reduced cost-sharing for anyone that is deemed eligible for unemployment compensation in 2021. These options provide a low or no-cost alternative to COBRA. [Click here to see plans and compare costs.]

State mini-COBRA eligibility changes. The COBRA Assistance availability for state continuation of coverage programs, along with the new eligibility window, may require Maine to take regulatory or legislative action to allow individuals to re-gain access to mini-COBRA benefits so they can access the assistance. Given that the COBRA assistance begins in April and ends September 30 regardless of when and individual enrolls, Maine will need to take quick action to allow enrollment in mini-COBRA for eligible individuals. [Click here for more]