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It could become more affordable for laid-off workers to keep their employer-sponsored health insurance, thanks to a provision in the Covid relief bill making its way through Congress.
As part of the $1.9 trillion stimulus package, the government would pay for former employees to maintain health coverage from their old job through COBRA, or the Consolidated Omnibus Budget Reconciliation Act.
COBRA typically allows people who leave a company with 20 or more employees to pay to continue their workplace insurance plan for as long as 18 months.
But the option tends to be pricey because individuals are now shouldering the entire cost of the plan without any company support.
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The average 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 would subsidize those costly premiums.
How many Americans would benefit remains unclear.
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 would qualify 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 the Department of Labor, she added.
How does the subsidy change my costs?
The stimulus bill passed by the House at the end of February said the government would cover 85% of COBRA premiums. When the Senate approved the bill this month, it raised that subsidy to 100%. The legislation is now going back to the House, which is not expected to make major changes to it.
Beyond the premiums, you could still be on the hook for any co-pays and deductibles.
How long would the subsidy last?
It’s expected that the subsidy will begin by early April and go through September. Typically, you can’t be on COBRA for more than 18 months in total, so some people may be cut off sooner than September.
Once you receive notice of you eligibility for COBRA, you likely will have to sign up within 60 days.
When does coverage through COBRA make sense?
The biggest drawback of COBRA is usually the cost for laid-off workers, so the relief bill may wipe out that obstacle. One of the largest advantages is that you get to keep your current doctors and health-care providers.
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.
Some workers who lost job-based coverage earlier in the pandemic and already enrolled in Medicaid or marketplace coverage may prefer to stay in that coverage to avoid further coverage transitions.
Laurel Lucia
director, Health Care Program at UC Berkeley’s Center for Labor Research and Education
With the COBRA subsidy, you may find that you’ll pay less to keep your employer coverage than with a marketplace plan, Donovan said, “especially if they were higher-income and therefore didn’t qualify for Affordable Care Act subsidies.” (The relief bill, however, is also expected to expand marketplace subsidies to more people.)
If you’ve already met your deductible for the year, COBRA could be even more affordable compared with other plans, experts say.
Still, the subsidies may be coming late in the game for many people, said Laurel Lucia, director of the Health Care Program at the University of California Berkeley’s Center for Labor Research and Education.
“Some workers who lost job-based coverage earlier in the pandemic and already enrolled in Medicaid or marketplace coverage may prefer to stay in that coverage to avoid further coverage transitions,” Lucia said.