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Arpa Cobra Subsidy and Severance Agreement

February 26, 2023

The ARPA Cobra Subsidy and Severance Agreement Explained

The American Rescue Plan Act (ARPA) has recently introduced a new COBRA subsidy that aims to help those who have lost their jobs during the pandemic. The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to continue their employer-provided health insurance coverage for a limited period if they lose their jobs. However, the cost of COBRA coverage can be exorbitant, which makes it challenging for many individuals to afford. The ARPA subsidy aims to address this issue by providing a temporary subsidy that will cover a significant portion of the COBRA premiums. In this article, we will discuss the ARPA COBRA subsidy and the severance agreement in more detail.

What is the ARPA COBRA Subsidy?

The ARPA COBRA subsidy is a provision in the American Rescue Plan Act that provides a 100% subsidy for COBRA continuation coverage premiums for eligible individuals from April 1, 2021, through September 30, 2021. The subsidy applies to individuals who lost their job due to involuntary termination or reduction in hours and who were previously enrolled in their employer`s health insurance plan.

Under the ARPA subsidy, eligible individuals will not have to pay any premiums for COBRA continuation coverage during the subsidy period. Instead, the subsidy will be paid directly to the employer or insurer, who will then cover the cost of the premiums. In addition, those who have already elected COBRA continuation coverage and are currently paying premiums will have the option to either receive a refund or credit for the premiums paid between April 1, 2021, and the date the subsidy goes into effect (usually April 1, 2021).

Who is Eligible for the ARPA COBRA Subsidy?

To be eligible for the ARPA COBRA subsidy, individuals must meet the following criteria:

– They must have lost their job due to involuntary termination or reduction in hours.

– They must have been enrolled in their employer`s health insurance plan at the time of job loss.

– They must have been eligible for COBRA continuation coverage at the time of job loss.

– They must not be eligible for Medicare or other group health coverage.

It`s important to note that the ARPA subsidy is not available to individuals who voluntarily left their job or were terminated for gross misconduct.

The Severance Agreement

A severance agreement is a contract between an employer and employee that outlines the terms of separation. In some cases, employers offer severance packages to employees who are being laid off, which can include a lump-sum payment, continued health insurance coverage, and other benefits.

Under the ARPA COBRA subsidy, if an employer offers a severance package that includes health insurance coverage, the employer may have to pay the full cost of the COBRA premiums during the subsidy period. This means that eligible individuals who receive a severance package that includes health insurance coverage may be able to continue their coverage without paying any premiums until September 30, 2021.

Conclusion

The ARPA COBRA subsidy is a temporary provision that aims to help individuals who have lost their jobs during the pandemic maintain their health insurance coverage. Eligible individuals will be able to continue their coverage without paying any premiums from April 1, 2021, through September 30, 2021. Employers who offer severance packages that include health insurance coverage may also have to pay the full cost of the COBRA premiums during the subsidy period. If you are eligible for the ARPA COBRA subsidy, be sure to take advantage of this opportunity to maintain your health insurance coverage without incurring any additional costs.