State Mini-COBRA ARPA Subsidy Obligations

There are 21 FAQs in the DOL’s guidance released on April 7, 2021 providing clarification on the COBRA subsidy added by the American Recue Plan Act of 2021 (ARPA). Generally, when we think of COBRA, the focus is on federal COBRA laws, that are typically applicable to private sector employers subject to ERISA with twenty or more employees and governmental plans. State continuation, or ‘mini-COBRA” laws have been adopted by over 40 states and often fill in gaps where the Federal COBRA laws do not apply or extends coverage after Federal COBRA has been exhausted.

The COBRA subsidies under ARPA are also available to Assistance Eligible Individuals (AEIs*) enrolled in a state continuation program; however, ARPA does not change any state program requirements or time periods for election of state continuation. This means there are important differences on how the subsidies work for health plans only subject to state continuation (e.g., church plans or employer plans when the employer has less than 20 employees).

  • It does not add a Notice requirement for States if the State does not have a notice requirement now. The general notice, second election notice and subsidy expiration notice requirements are only applicable to federal COBRA plans. The DOL did provide a model alternative notice to satisfy mini-COBRA subsidy notice requirements.
  • If the state’s mini-COBRA laws do not provide continuation coverage due to a reduction in hours, an AEI is not eligible for a subsidy if they lost coverage because their hours were reduced.
  • Individuals must elect to receive state continuation within the state’s required original election time period, unless the state issues guidance permitting a second election period. The section of ARPA that provides for the second election period references ERISA, the Internal Revenue Code, and the Public Health Service Act—but does not explicitly address state law programs. 

*AEIs are those whose involuntary termination or reduction in hours occurred:

  • During the subsidy period (4/1/2021 – 9/30/2021)
  • Prior to the subsidy period but they have existing COBRA coverage extending into the subsidy period
  • Prior to the subsidy period and have not elected COBRA. But if they had elected, coverage would have extended into the subsidy period.
    • Includes those who elected and subsequently dropped COBRA coverage before the subsidy period begins.

If you have any questions regarding the COBRA subsidy guidance, contact:

The Compliance Rundown is not a law firm and cannot dispense legal advice. Anything contained in this post or on their website is not and should not be construed as legal advice. If you need legal advice, please contact your legal counsel.

Making the switch between State Continuation & COBRA


The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law allowing employees, spouses and dependents in certain situations to temporarily continue their health coverage at group rates. In general, COBRA will apply to employers that have 20 or more employees on more than 50 percent of their “typical business days” in the preceding calendar year.

State continuation (often referred to as mini-COBRA) varies by state. While the majority of states have passed their own laws that require smaller employers to provide COBRA-like continuation of benefits for certain employees and their families, not all states offer a continuation program.  In some states, state continuation coverage rules also apply to larger group insurance policies and add to COBRA protections.  (Note: State continuation coverage requirements generally apply to insured plans only.)

When a small business grows above 20 employees* or an employer’s work force falls below 20 employees during the year, its plans will continue to be subject to whichever option (state continuation or COBRA) was applicable at the beginning of the calendar year until a new calendar year begins. 

i.e.  If an employer exceeds 20 employees during a calendar year, then the group health plan may become subject to COBRA on the following first day of January.

If an employer drops below 20 employees during a calendar year, the employer’s group health plan remains subject to COBRA through the end of that calendar year.

On the first day of January, (regardless of policy renewal date) is when the employer should look at whether it’s still considered a small employer (i.e. fewer than 20 employees on at least 50% of the employer’s “typical business days” during the preceding calendar year) or whether it is subject to COBRA compliance.  It will only be exempt from COBRA compliance if during the preceding calendar year, it normally had fewer than 20 employees. However, despite being exempt, an employer cannot terminate existing COBRA coverage even after the end of the calendar year.

*There is an exception to this rule when a small employer’s growth is due to a stock acquisition.