QUESTION: We understand that the COBRA premium subsidy is set to expire on September 30, 2021. Does this mean the subsidy will be cut off on that date regardless of a plan’s COBRA billing cycle?
ANSWER: In general, the COBRA premium subsidy for an assistance eligible individual (AEI) ends on the earliest of (1) the end of the AEI’s maximum COBRA coverage period; (2) the first month after the AEI becomes eligible for other disqualifying health coverage; or (3) September 30, 2021 (the end of the subsidy period as set by the American Rescue Plan Act (see our Checkpoint article)). However, the IRS has clarified that, under certain circumstances, subsidy availability will not be cut off on September 30 (see our Checkpoint article). Rather, the subsidy will continue until the end of an AEI’s last period of coverage that begins on or before September 30. (For this purpose, a “period of coverage” is a month or shorter period for which COBRA premiums are typically charged by the plan.) For example, if a plan typically collects COBRA premiums on a biweekly basis, including for the period beginning September 26 and ending October 9, that plan’s AEIs will continue to receive the subsidy through October 9. At that point, the AEIs may choose to discontinue COBRA coverage or, if they are still within their maximum COBRA coverage period (typically 18 months), they may continue coverage without the subsidy at the plan’s usual rates.
For more information, see EBIA’s COBRA manual at Section VI.H (“ARPA Premium Subsidy”).
Contributing Editors: EBIA Staff.