Can’t Afford COBRA? Help Is on the Way (Temporarily)

Did you lose your job during the pandemic and previously had employer-sponsored health coverage? Well, paying for continued health coverage through COBRA is about to become affordable for workers, but only temporarily.

Under COBRA, workers who lose job-based health coverage because of termination of employment (other than for gross misconduct) or reduction in hours, may buy continued coverage through their former employer. But that continued coverage is expensive and out of reach for many workers, especially during the pandemic. Ordinarily, a worker must pay up to 102% of the cost of the health premium.

The House version of the American Rescue Plan Act of 2021 (“ARPA”) provided for an 85% government subsidy of the cost of COBRA premiums. The Senate version of the bill, passed on March 6, 2021, increases that subsidy to 100%. While a worker would pay 15% of the COBRA premium under the House version, she would pay nothing under the Senate version.

The COBRA premiums would be paid for through tax credit subsidies to employers and multi-employer funds. The Senate version is expected to pass the House and be signed into law by President Biden as soon as it reaches his desk.

Employers and multiemployer plans are required to notify individuals of their eligibility for the premium subsidy. The government will issue model notices.

Unfortunately, this COBRA relief will be short-lived and in effect only from April 1 through September 30, 2021.

Here are the details:

Who’s eligible

• Individuals who lost job-based coverage due to termination of employment (other than for gross misconduct) or reduction of hours and elected COBRA
• Such individuals who had not elected COBRA as of April 1, 2021
• Such individuals who had COBRA coverage but dropped it before April 1, 2021

Who’s not eligible

• Individuals who voluntarily left their jobs
• Individuals who become eligible under another group health plan (for example, spousal coverage). These individuals are required to inform their health plan of other coverage
• Individuals who are eligible for or receiving COBRA for any other qualifying event (e.g., death of a spouse, divorce, Medicare eligibility)

Details of the legislation will be fleshed out in regulations that the Department of Labor is directed to issue. You may want to ask your former employer or health plan if you are eligible for the subsidy.