The end of a temporary federal health insurance premium subsidy program could push millions of people into the market for individual and family health coverage Oct. 1.
The program, created by the American Rescue Plan Act of 2021 (ARPA), provided billions of dollars in aid to help displaced workers keep their usual employer-sponsored health benefits in place during the COVID-19 pandemic, by paying 100% of the premiums for COBRA health benefits continuation coverage.
ARPA and COBRA
A section in the Consolidated Omnibus Budget Reconciliation Act of 1985 gives many group health plan enrollees the right to pay to keep their employer-sponsored health coverage in place when they leave their emloyers.
Under the ordinary COBRA rules, employers can charge workers who keep their health benefits as much as 102% of the premiums.
ARPA drafters set the temporary, COVID-19-era COBRA premium payment program to begin April 1 and end Sept. 30.
Employers could choose whether or not to offer the ARPA subsidy for COBRA payments to departing workers. The employers that offered access to the temporary COBRA subsidy were supposed to notify the former employees of the end of the subsidy by Sept. 15, according to an analysis by three lawyers at Venable — Juliana Reno, Lisa Tavares and Ryann Aaron.
The lawyers noted that implementation of the new subsidy was so rushed that regulators have not yet explained how employers are supposed to handle some common subsidy scenarios, such as when workers left their employers and became eligible for subsidy help only in August.
"The IRS has not provided specific guidance regarding these scenarios," the lawyers wrote. "We are hopeful that the IRS will not impose penalties if a plan administrator provides the expiration notice at a time that is reasonable under the circumstances."
