The ARRA COBRA Subsidy: What Plans Are Covered?

Federal COBRA Continuation Coverage Plans

The ARRA provides subsidies for “COBRA continuation coverage,” which is required by federal law for “group health plans.” A group health plan generally includes any plan sponsored by an employer or employee organization to provide health care.

The subsidy applies to health insurance (including self-insurance) and Health Reimbursement Arrangements (HRA). However, it does
not apply to Flexible Spending Accounts (FSA) or Cafeteria Plans!

State Mini- COBRA Plans

Most states have “Mini-COBRA” plans that cover employers with fewer than 20 employees. The ARRA subsidy applies to State “mini-COBRA” plans if the coverage is comparable to COBRA.

Comparable continuation coverage does not include every State law right to continue health coverage. To be comparable, an eligible individual must generally have the right to continue coverage substantially similar to that provided under the group health plan at a monthly cost based on a specified percentage of the plan’s cost of providing such coverage, i.e., a limit on the premium.

What If the State Plan Varies in Length or Has Different Qualifying Events?

The fact that a state plan has a shorter or longer period of continuation coverage than the federal COBRA program does not disqualify the State program from being “comparable” for purposes of the subsidy. Likewise, the fact that the state plan applies different qualifying events does not make participants ineligible for the federal subsidy. The critical issue is how the premium is calculated.

Example

The State Mini-COBRA program in a particular state provides for a maximum of 6 months of continuation coverage(rather than 18 months under COBRA). The premiums, however, are the same as those paid for active employees. In addition, the State
requires that an employee be covered by the employer’s group health insurance program for a minimum of three months prior to the qualifying event in order to receive the State Mini-COBRA benefits.

Such a State program is treated as comparable continuation coverage for purposes of the ARRA and participants are eligible for the subsidy.