What to know: ARPA and Its Effects on QSEHRA & COBRA

Wondering how ARPA affects QSEHRA and COBRA? The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021, granting COBRA eligible individuals free COBRA coverage for six months, beginning April 1, 2021 and ending September 30, 2021. While QSEHRA isn’t subject to COBRA from an employer perspective, it’s important to note how this affects employees who are participating in QSEHRA with COBRA as their insurance.

ARPA, QSEHRA and COBRA

Read on for helpful tips on The American Rescue Plan Act and how it affects QSEHRA and COBRA.

Is QSEHRA a qualifying group plan that requires COBRA coverage to be extended to former employees?

No, QSEHRA is not considered a group plan and therefore does not meet requirements for extending COBRA coverage to former employees.

Can employees participate in QSEHRA if they have COBRA from a previous employer?

Yes they can! In order to participate in QSEHRA, employees must have insurance that meets Minimum Essential Coverage (MEC). COBRA is one of these qualifying forms of insurance.

Traditionally, when employees are participating in QSEHRA with COBRA coverage they pay their monthly COBRA premium to either their former employer or the COBRA Administrator, and then the employee is reimbursed for their premium up to their monthly allowance by their current employer offering the QSEHRA.

What changes for COBRA participants under ARPA?

COBRA participants may be eligible for FREE COBRA for a six month period (April 1- Sept 30, 2021). During this time frame the employer providing the COBRA coverage will pay for the monthly premium, and then the employer will receive tax credits for the premiums at year end.

Who is eligible for the free COBRA under ARPA?

Premium assistance is available to “Assistance Eligible Individuals” (AEIs). AEIs were covered by the group health plan on the day before the qualifying event (termination, reduction hours) and elects COBRA continuation coverage.

An individual does not qualify for ARPA if they are eligible for other group coverage or Medicare. 

Note: Employees that voluntarily left their former employer do not qualify for the COBRA subsidy.

How will this COBRA change due to ARPA work with QSEHRA?

Since COBRA participants will not be paying COBRA premiums for 6 months, they need to stop their premium reimbursements during this time. Employers can request employees pay back any funds that were over reimbursed.

Employees can still participate in QSEHRA depending on how the plan is designed.

• Includes Medical Expenses: If the QSEHRA includes reimbursement for medical expenses, the employee may continue to submit claims for prescriptions, copays, doctors visits and other qualified medical expenses while receiving the free COBRA.
• Includes Premiums only: If the plan allows for premium reimbursement only, employees will continue to accrue their QSEHRA allowance during this time for use later in the year when the free COBRA runs out or their insurance plan changes.

What do employees need to do?

It’s the responsibility of the employee to inform us if they qualify for free coverage. Employees participating in COBRA should contact their COBRA administrator to see if they qualify for subsidized premiums.

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The IRS has issued two sets of guidance related to this topic: FAQS and Notice 2021-31.