COBRA Subsidy: Who’s Eligible, How it’s Funded, and How to Deliver Notices to Employees
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The federal government initiated several programs to address the challenges posed by the coronavirus outbreak. One of these programs was the Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy, which excluded qualified individuals from paying premiums for a specified duration. Although the program has ended, insurance brokers continue to offer valuable services to clients who have transitioned from the subsidy period.
This guide discusses COBRA and the subsidy program. You'll also learn how brokers nationwide drive business growth through COBRA coverage offerings. The Difference Card works with COBRA to reduce expenses and optimize compliance with streamlined administrative support.
Overview of COBRA and the Subsidy Program
COBRA is a federal law that provides covered employees and their families with a temporary plan when they lose their group health coverage due to a qualifying event. This law has existed since 1986 and continues to serve workers in America today.
In 2021, the federal government introduced the COBRA subsidy program under the American Rescue Plan Act (ARPA). The subsidy covered 100% of the COBRA premium costs for assistance eligible individuals (AEI) from April 1, 2021, through September 30, 2021. In other words, AEIs paid nothing for COBRA coverage within the subsidy period, and employers or carriers recovered the amount through a tax credit or refund. AEIs included individuals who:
- Elected COBRA continuation coverage.
- Qualified for COBRA continuation coverage because of a qualifying event.
- Were qualified beneficiaries of a COBRA continuation coverage within the subsidy period.
Examples of qualifying events are involuntary termination or reduced hours of employment. The qualified beneficiary could be the covered employee's family member, such as spouse and dependent children. Individuals enrolled in state continuation health coverage similar to COBRA also received premium assistance.
The ARPA also introduced notice requirements. While the subsidy program was in effect, employers had to:
- Update COBRA election notices to reflect the subsidy.
- Send notices to individuals who experienced a qualifying event within the maximum coverage period.
- Send notices to premium assistance recipients when the subsidy ended.
What's Next After the COBRA Subsidy Program?
COBRA premiums have resumed since the subsidy period ended. Employers must continue performing their obligations under COBRA and other applicable laws, such as the Employee Retirement Income Security Act (ERISA). Employees must also understand their responsibilities if they want to elect COBRA continuation coverage after a qualifying event.
Furthermore, those who received the COBRA subsidy may consider other options for health insurance coverage. Brokers can help these clients find affordable and beneficial solutions that meet their needs.
Are There Alternatives to the ARPA COBRA Subsidies?
Before the ARPA, the American Recovery and Reinvestment Act (ARRA) provided a 65% subsidy to qualified individuals who could not afford COBRA premiums. The subsidy was initially scheduled to end on December 31, 2009, but continued until May 31, 2010.
Following the ARRA, the federal government introduced the Health Coverage Tax Credit (HCTC), which paid 72.5% of qualified health insurance premiums for eligible individuals and their families. The HCTC also applied to certain persons with COBRA continuation coverage. It ended on December 31, 2021.
Currently, the premium tax credit applies to coverage purchased through the health insurance marketplace — the exchange. However, employees must decline COBRA to be eligible.
The Role of Insurance Brokers in Managing COBRA
Insurance brokers provide valuable services to clients, guiding them through their COBRA-related challenges. Here are five examples:
- Education: Clients often rely on brokers for information about COBRA. They want to know the requirements and costs to make informed decisions. Brokers can assist by addressing these inquiries.
- Coverage options: When coverage under COBRA ends, individuals need brokers to assess coverage options. Brokers can help them explore alternative coverage options, guide available plans and assist in transitioning to new coverage if needed.
- Premium negotiation: Brokers can help clients obtain competitive premium rates to mitigate expenses. Exploring cost-sharing arrangements and alternative coverage structures could benefit employers and employees financially.
- Assistance with compliance: Brokers can introduce employers to systems that streamline COBRA compliance. This added service can help brokers retain clients and drive growth in their business.
- Support and guidance: Brokers may provide ongoing support to employers and employees about COBRA requirements. They can address questions and concerns and assist with emerging challenges.
How The Difference Card Can Help
The Difference Card helps companies build cost-effective, COBRA-eligible benefit plans. Our plan options are included in the federal COBRA election notice and offered to eligible individuals throughout a plan year. Employees can elect COBRA coverage with The Difference Card for an added advantage.
Additionally, employers can manage COBRA administration through The Difference Benefits Admin System. This self-service portal allows employers and members to benefit from automated COBRA notices, employee billing, premium collection and reporting. The Difference Card helps ensure compliance with COBRA and ERISA requirements. Extending these solutions to clients helps brokers bring real value.
The Difference Card strategically partners with top brokerage agencies and independent agents to drive business growth. It delivers innovative health insurance solutions that reduce employers' costs while offering quality benefits to employees.
Product partners nationwide have used The Difference Card to create customer health benefits for employers, saving them an average of 18% on their health insurance spending. In 2023 alone, The Difference Card assisted producer partners in winning 117 new accounts and $5.1 million in revenue, which amounted to $129 million in new medical premiums.
Frequently Asked Questions
To help you learn more about the Difference Card and how it supports brokers, let's answer some commonly asked questions:
How Does The Difference Card Work With COBRA?
Typically, after a qualifying event, the employer contacts The Difference Card and the insurance carrier to terminate the coverage. The employer forwards the COBRA election paperwork to the employee, who may elect COBRA and The Difference Card as a medical plan. If the employee elects COBRA with The Difference Card, the employee's coverage is reinstated. The employer contacts The Difference Card when the COBRA period ends.
Does The Difference Card Simplify COBRA Administration?
Yes, The Difference Benefits Admin System removes manual processes and reduces workload. It's an automated system designed to ease the administrative burden and help users ensure compliance. COBRA managers can leverage this advanced solution to save time and money.
Is The Difference Card Reliable?
The Difference Card offers reliable solutions to brokers and has served clients for over two decades. The team is committed to helping individuals and companies drive growth through strategic planning and cost reduction. The company is founded on values such as integrity and transparency. You can view the client testimonials to see what they have to say.
Partner With The Difference Card
The Difference Card helps independent agents and brokerage agencies provide practical healthcare solutions to clients. Our professionals have experience in the industry and are ready to partner with you to drive growth. Our excellent client service has allowed us to form solid and lasting partnerships with the country's top producers. Request a proposal today!
