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The government will pay for laid-off workers to maintain their employer-sponsored health insurance through September, thanks to a provision in the $1.9 trillion stimulus package signed into law on Thursday by President Joe Biden.
As part of the relief bill, the government will subsidize COBRA premiums for former workers of a company until the fall. COBRA, or the Consolidated Omnibus Budget Reconciliation Act, permits people who leave a company with 20 or more employees to pay to stay on their workplace insurance plan for as long as 18 months.
But the option tends to be prohibitively expensive.
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How many Americans will benefit remains unclear.
That’s because, to stay on their workplace plan, a laid-off worker typically must continue to pay their monthly premiums, as well as their employer’s usual contribution and then another 2% administrative fee on top of that.
The typical annual premium for job-based coverage in 2020 was $7,470 for individuals and $21,342 for family coverage, according to the Kaiser Family Foundation.
Now, the government will fully cover these pricey premiums for the next seven months. COBRA subsidies have occurred before, including during the Great Recession and in 2002 for people who lost their jobs to international trade conflict.
By one count, around 130,000 unemployed working-age adults had health insurance coverage through COBRA in 2017. But that was, of course, before the pandemic caused unemployment to soar. And again, many people don’t opt for the coverage because of its cost.
With the subsidy, “you may see dramatically more people sign up,” said Caitlin Donovan, a spokeswoman for the National Patient Advocate Foundation.
Here’s what you need to know.
Who qualifies for the subsidy?
You’d be eligible if you involuntarily left a job that offered health insurance and you do not qualify for another employer plan or Medicare, Donovan said.
“You would even qualify if you turned down COBRA before,” Donovan said. Any family members on your plan would also be fully covered.
You should receive written notification of your eligibility, likely from your employer or health insurance company. If you haven’t heard anything, reach out to your former insurer.
How does the subsidy change my costs?
How long will the subsidy last?
It’s expected that the subsidy will begin by early April and go through Sept. 30, 2021.
Typically, you can’t be on COBRA for more than 18 months in total, so some people may be cut off sooner than that date though, depending on when they began their coverage.
What if I already turned down COBRA coverage?
Don’t worry. It’s not too late for you to take advantage of this relief.
Laid-off workers typically have to sign up with COBRA within 60 days after their employment ends. But even if you, say, turned down the coverage in August 2020 because the premiums were too high, you can now go back and enroll, according to the Georgetown University Health Policy Institute.
Once you receive notice of you eligibility for COBRA, you will have to sign up within 60 days, however.
Will I have to pay for months I wasn’t insured through COBRA?
Usually if you don’t enroll right away with COBRA and decide to do so later, you have to back pay premiums because you’re not allowed to have a gap in coverage.
The relief bill temporarily changes that policy.
According to the experts at Georgetown, you would not have to pay premiums back to the date you were originally eligible to enroll in COBRA.
However, you’ll only be covered for claims starting at your date of enrollment.
When does coverage through COBRA make sense?
The biggest drawback of COBRA is usually the cost for laid-off workers. The relief bill clears that hurdle.
One of the main advantages is that you get to keep your current doctors and health-care providers. If you’ve already met your deductible for the year, COBRA could be even more affordable compared with other plans, experts say.
Other insurance options for the unemployed include Medicaid and shopping for a plan on the Affordable Care Act’s marketplace.
Medicaid may make sense if you expect your financial troubles to remain for a long time and will also leave you with no monthly premiums.
Meanwhile, some jobless Americans may qualify for a free marketplace plan on the ACA, or Obamacare, exchange. Not only won’t you have to pay a premium, but your out-of-pocket expenses may be minimal too.
“As a result, a marketplace plan may be a better deal for you,” said Edwin Park, a research professor at the Georgetown University McCourt School of Public Policy.