Benefits Buzz

Loss of COBRA Subsidy Creates Individual Market SEP

Posted on May 7th, 2021

The U.S. Department of Health and Human Services (HHS) recently finalized its Notice of Benefit and Payment Parameters which is also summarized in this Fact Sheet. These regulations are issued each year and make updates and changes to various provisions of the Affordable Care Act (ACA). Of particular importance is a new special enrollment period (SEP) that will be made available for health insurance plans sold throughout the individual market (on and off an Exchange).

The new regulations authorize an SEP in the individual market when a person voluntarily terminates COBRA coverage after the complete cessation of government subsidies which cover some or all of the COBRA premium.

The complete loss of any employer (or former employer) contribution towards COBRA premiums also creates an SEP in the individual market. In both scenarios, an individual has 60 days before and after the loss of government subsidies or employer contributions to select a plan in the individual market.

This new SEP may come as welcomed news as we are in the midst of the federal COBRA subsidies that were made available under the American Rescue Plan Act of 2021 (ARPA). ARPA is the latest stimulus bill that was signed into law by President Joseph Biden, and it provides a 100% federal subsidy of COBRA premiums for employees/former employees and their family members who experienced a loss of coverage due to a reduction in hours or an involuntary termination of employment.

The federal COBRA subsidy is available between April 1, 2021 and September 30, 2021 (unless extended through additional legislation). Those receiving a federal COBRA subsidy will have an SEP to select an individual plan with an effective date of October 1, 2021 (or an earlier effective date if eligibility for the federal COBRA subsidy is lost earlier).

It should be noted that the loss of government subsidies or employer contributions for coverage available under “mini-COBRA” laws will also create an SEP in the individual market. Mini-COBRA is a common phrase used for describing continuation coverage that is made available under a state law. Mini-COBRA usually applies to employers who are not subject to COBRA (i.e., those with fewer than 20 employees), but in some states it does also apply to employers who are subject to COBRA.

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