FAQs: American Relief Plan Act (ARPA) and COBRA Subsidy

Here are answers to Frequently Asked Questions (FAQs) regarding implementation of certain provisions of the American Rescue Plan Act of 2021 (ARPA), as it applies to the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA.

General Information

Q1: What is ARPA?
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA) into law. Section 9501 of ARPA requires employers to extend temporary premium assistance for COBRA continuation coverage for qualified individuals as defined in Question #3.
Q2: To which plans does the premium assistance apply?
The COBRA premium assistance provisions apply to all U-M health plans, the dental plan, and the vision plan. The ARPA COBRA subsidy rules apply to all plans that are subject to federal COBRA. It generally applies to self-insured groups that are subject to COBRA. However, it does not apply to health flexible spending accounts (FSAs). Health FSAs are specifically excluded.

Eligibility

Q3: Who is eligible to receive the COBRA premium assistance?
The ARPA makes the premium assistance available to qualified individuals who meet the specific requirements during the period from April 1, 2021 through September 30, 2021. The following individuals who are or become qualified (employees plus affected spouses and dependent children) as the result of a reduction in hours or an involuntary termination of employment may be eligible for the subsidy:
  • Individuals who were previously eligible for COBRA continuation coverage, but who did not elect COBRA and have coverage that would have extended into the subsidy period (e.g., an individual involuntarily terminated on October 1, 2020 who did not elect COBRA).
  • Individuals who were previously eligible for COBRA continuation coverage, elected, but dropped coverage, and have coverage that would have extended into the subsidy period (e.g., an individual involuntarily terminated on October 1, 2020, who elected COBRA, but did not pay premiums after December 31, 2020).
  • Individuals who become eligible during the subsidy period (e.g., an individual involuntarily terminated on May 1, 2021) or had remaining continuation coverage eligibility as of April 1, 2021.
Q4: Are the ARPA COBRA subsidies limited to those employees (and dependents) who lost group health plan coverage due to a reduction in hours or an involuntary termination as a direct result of COVID-19?
No. ARPA does not require the individual's reduction in hours or involuntary termination to be related to COVID-19 in any way.
Q5: Are spouses and dependents eligible for the subsidy?
Yes. The subsidy is available to any qualified individual associated with an involuntarily terminated employee or an employee who loses coverage due to a reduction in hours. This includes spouses or dependent children who independently elect COBRA even when the former employee declines the coverage. Other Qualified Adult dependents are excluded from the subsidy under Federal guidelines.
Q6: If a former employee who was terminated involuntarily is eligible for coverage under a spouse's group health plan, is the former employee eligible for the COBRA premium subsidy?
No. An individual will lose subsidy eligibility as of the first date the individual is eligible for coverage under any other group health plan.
Q7: What termination events would be considered an involuntary termination of employment?
An involuntary termination includes discharge, probationary period discharge, and Reduction in Force once COBRA has been issued. It does not include separation of employment such as resignation or retirement.
Q8: As an active employee with the University of Michigan, I paid 100% of the premium for the vision plan. Am I entitled to the COBRA subsidy for the vision plan?
Yes. An individual's eligibility for COBRA premium assistance under ARPA is not tied to whether the employer contributes to the cost of coverage for non-COBRA participants.
Q9: Only part of my family elected COBRA continuation coverage but all of us were eligible. Can I enroll the others and take advantage of the premium assistance?
Each eligible individual may independently elect COBRA continuation coverage. If a family member did not elect COBRA continuation coverage when first eligible and that individual would be qualified for ARPA, that individual has an additional opportunity to enroll and qualify for the premium assistance. However, this extended election period does not extend the maximum period of COBRA continuation coverage had COBRA continuation coverage been originally elected. See Question #3 and Question #5 for more information.
Q10: If a qualified individual becomes eligible for coverage under a new group health plan, such as coverage under a spouse’s plan, does the individual lose subsidy assistance eligibility?
Yes. Eligibility for the subsidy ends on the first date that an individual becomes eligible for any other group health plan.
Q11: If I am receiving the subsidy and become eligible for coverage under a new group health plan, do I need to notify the University of Michigan?
Yes. Individuals have the sole obligation to notify their former employers in writing if they become eligible for coverage under another group health plan or Medicare. Individuals who fail to do so may be fined. In the case of any such failure that is fraudulent, such person shall pay a penalty equal to the greater of (1) $250 or (2) 110% of the premium assistance provided under ARPA after termination of eligibility.
Q12: I received a COBRA notice from the university, but I am currently working in a benefit eligible position. Am I eligible to receive the COBRA premium subsidy?
No. Individuals who are eligible for a group health plan are not eligible for the subsidy. You received a COBRA mailing from the university because ARPA requires employers to send a COBRA extended enrollment notice to everyone who received a COBRA notice between November 1, 2019 and May 14, 2021. No action is required on your part.

Timing and Duration of Premium Assistance

Q13: When does the ARPA COBRA subsidy apply and how long does it last?
The COBRA subsidy is effective April 1, 2021 through September 30, 2021. However, the subsidy will end earlier if one of the following occurs:
  • The individual becomes eligible under any other group health plan or Medicare (not necessarily actually enrolled but just eligible); or
  • The individual reaches the maximum period of coverage required under COBRA.
Q14: Does ARPA extend the maximum coverage period during which COBRA is available?
No. ARPA does not extend the length of COBRA coverage beyond the existing maximum coverage periods. For example, if a qualified individual's maximum coverage period due to termination of employment would end on May 31, 2021, the individual would only be entitled to subsidized COBRA for the months of April and May 2021, after which the right to COBRA would terminate due to the expiration of the 18-month maximum coverage period.
Q15: Is a COBRA qualified individual required to elect COBRA retroactively to the date of their qualifying event to obtain COBRA premium assistance under ARPA?
No. COBRA qualified individuals eligible for COBRA premium assistance may elect subsidized COBRA beginning April 1, 2021. A COBRA qualified individual is not required to elect and pay for COBRA coverage retroactively in order to access subsidized COBRA for the period of April 1, 2021 through September 30, 2021.
Q16: Does an individual's COBRA coverage terminate when the subsidy terminates?
Not necessarily. The COBRA coverage time period is measured separately from the subsidy time period. Because the maximum subsidy period is set for a specific period of time (April 1, 2021 through September 30, 2021), individuals who have COBRA coverage remaining after the subsidy is exhausted would revert to paying the full premium after the subsidy ends.

Premiums

Q17: How do I apply for the premium assistance?
If you are qualified for COBRA premium assistance, the university will provide you and your eligible dependents with a notice of your eligibility to elect COBRA continuation coverage and to receive the premium assistance. The notice will include the forms necessary for enrollment, including forms to indicate that you are eligible for premium assistance and that you are not eligible for another group health plan or eligible for Medicare.
Q18: How much is the subsidy?
The ARPA subsidy is 100% of the premium. Co-pays and deductibles stil apply.
Q19: How will the premium assistance be provided to qualified individuals?
Qualified individuals do not have to pay any of the COBRA premium for their eligible period of coverage between April 1, 2021 and September 30, 2021.
Q20: Who pays for the subsidy?
The federal government will pay for the subsidy. The university will fund the 100% premium subsidy upfront and then receive a credit on certain payroll taxes.
Q21: If someone hasn't paid COBRA premiums for a number of months, do they have to pay for the prior months to get the subsidized coverage from April 1, 2021 through September 30, 2021?
No. Assuming the individual experienced an involuntary termination or reduction in hours, the statute requires the plan to offer a new election opportunity for the period of subsidized coverage (April 1, 2021 - September 30, 2021). The individual is not required to pay for months of premiums prior to April 1, 2021 in order to elect coverage during that period.
Q22: I have been enrolled in COBRA continuation coverage since December 2020. If I am eligible for the subsidy, will I receive a refund of the premiums that I have already paid?
Yes. If you are eligible for the COBRA ARPA subsidy and you have already paid premiums for COBRA continuation coverage for April 2021 through September 2021, you will receive a refund.

Notices

Q23: Why am I receiving a second COBRA Election Notice?
Under the ARPA, the university is required to provide a second COBRA Election notice to individuals who may be eligible for a premium subsidy for at least one month. This requirement also provides you with a new 60-day election period.
Q24: I am currently working in a benefit eligible position. Why did I receive a COBRA notice?
You received a mailing from the university because ARPA requires employers to send a COBRA extended enrollment notice to everyone who received a COBRA coverage continuation notice between November 1, 2019 and May 14, 2021. You may receive multiple notices if you held multiple jobs during that time period. Individuals who are eligible for a group health plan are not eligible for the subsidy. No action is required on your part.
Q25: What is the Notice of Expiration of Subsidy?
The Expiration of Subsidy is an advance notice advising an individual who is receiving a COBRA subsidy about the expiration of the subsidy. The subsidy may end early due to the individual reaching the end of their COBRA maximum period of continuation coverage, or the subsidy will end on September 30, 2021 due to the end of the premium assistance period.