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What is the COBRA Subsidy? (And Do I Qualify?)
The COBRA subsidy offered through the American Rescue Plan allows qualifying individuals to have free health insurance from Apr-Sep 2021.
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Do you know someone who currently is or could be enrolled in COBRA? It’s possible they may be eligible for premium assistance from April 1, 2021 through September 30, 2021, even if they’re not currently enrolled in COBRA coverage!
What is COBRA?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It’s a law that goes back to 1985 and requires employers with 20+ employees to temporarily continue offering group health insurance to covered employees, their spouses, former spouses, and dependent children when group health coverage is otherwise lost. This helps bridge the gap between windows of coverage, particularly when switching to a new employer with group coverage or enrolling in an individual health plan.
Why is a COBRA subsidy being offered?
Many workers have lost their jobs or experienced a reduction in hours during the COVID-19 pandemic and are now facing the crisis of potentially losing their health insurance coverage due to cost and limited funds.
The American Rescue Plan Act of 2021 contains a provision for COBRA premium assistance to give eligible individuals the opportunity to have their premium covered for up to 6 months. If you never enrolled in COBRA but were offered it by your former employer, you may now have a window to enroll and take advantage of the available subsidy.
Do I qualify for the COBRA subsidy?
Someone who qualifies for the COBRA subsidy is called an Assistance Eligible Individual (AEI). An AEI is a person who lost their group health insurance coverage through their employer as early as October 1, 2019 through April 1, 2021 due to any of the following:
- Reduction in hours
- Status changed from full-time to part-time
- Temporary leave of absence
- Involuntary termination (other than gross misconduct)
If this fits your situation, you may qualify for a COBRA subsidy from April 1, 2021 through September 30, 2021, depending on when your 18-month COBRA eligibility window expires. (For example, if you lost your job in December of 2019, your COBRA eligibility would have begun January 2020 and expired 18 months later in June 2021. Your COBRA premiums for April, May and June 2021 could potentially be 100% subsidized.)
You’re ineligible for the COBRA subsidy if you’re able to enroll in group health coverage through a new employer’s plan (or your spouse’s plan) or if you become eligible for Medicare. If you voluntarily quit your job for whatever reason, you’re also ineligible for the subsidy.
Dependents of an AEI may individually elect to receive the subsidized COBRA coverage to fit their circumstances (for example, if the AEI now qualifies for Medicare but the dependents need COBRA). There is no income maximum to be an AEI.
How much does the COBRA subsidy cover?
If you are an AEI, you may receive COBRA coverage at no cost to you for the months of April 1, 2021 through September 30, 2021, depending on the timeframe of your COBRA eligibility. This no-cost premium includes the 2% administration fee that is typically charged to COBRA participants, meaning all 102% is fully subsidized.
If I’m currently enrolled in an individual health plan, am I still eligible to enroll and receive the subsidy?
Assuming you otherwise meet the requirements of an AEI above, the answer is yes. However, you may need to do some homework to determine if the switch from your existing plan is worth it for coverage (differences in benefits), cost (are you currently receiving a federal subsidy for your individual plan?) and hassle.
Remember, the COBRA subsidy only goes through September 2021. Come October 2021, you will either need to pay 102% of premium to continue COBRA coverage or enroll in a new plan.
I declined COBRA coverage previously. Am I still eligible to enroll and receive the subsidy?
If you otherwise meet the requirements of an AEI above, the answer is yes. You should receive a letter from your former employer for enrollment instructions, per this new COBRA election window.
Can I backdate my new COBRA coverage?
Employers should be sending notices by the end of May to former employees who may be deemed an AEI. Once you receive the notice, you have up to 60 days to claim you are an AEI and elect COBRA coverage.
When you submit your enrollment, you can choose to have the coverage begin at that point prospectively or to backdate its starting point as early as April 2021. Please note that you would only want to backdate your coverage if you had a medical procedure prior to your enrollment date (but no earlier than April 2021) and didn’t have health insurance to cover it.
Can I choose to have COBRA coverage prior to April 1, 2021 with this new election window?
No, you are only able to backdate COBRA coverage to April 1, 2021.
How do I enroll and take advantage of the new COBRA premium assistance?
Watch for the letter from your former employer that should be mailed by the end of May. If you have recently changed addresses or don’t otherwise receive a letter but believe you are a qualifying AEI, you may contact the employer and request treatment as an AEI.
How will my subsidized COBRA premiums be paid?
Instead of collecting premium payments from you, your former employer will be reimbursed directly through a COBRA premium assistance credit on their taxes.
Where do I get more information?
You can check the DOL’s webpage dedicated to the COBRA Premium Subsidy, which links to this particularly helpful page of Worker FAQs about COBRA Premium Assistance.