Under the now approved Biden administration’s nearly $2 trillion stimulus package, also known as the American Rescue Plan (ARP), provisions have been added to provide relief for lower income and middle class Americans to save on Health Insurance if they are out of a job, and on COBRA benefit from their employer or getting insurance via Obamacare (Affordable Care Act) through a health exchange.
While all employees can get COBRA today if they involuntarily lose a job (they just cannot quit), its very expensive as they are on the hook for the employer subsidy portion of their health insurance. This could be at least double the original premium they were paying when employed. But under the Biden relief bill, the government would pay the entire COBRA Health Insurance Premium from April 1 through Sept. 30.
However if a person gets a new job and qualifies for health insurance with the new employer they would lose eligibility for the COBRA health care relied.
The CBO estimated that a 64-year-old earning $58,000 would see monthly payments decline from $1,075 under current law to $412 because the federal government would take up much of the cost.
What about those who buy their own private insurance or through an exchange?
Those who bought their own health insurance via a government exchange, would also get relief under the Biden ARP package through lower premiums on purchased plans; with premiums for those plans would cost no more than 8.5% of their income (MAGI). These changes would start as soon as the bill is enacted through the end of 2022 and would not require people to re-enroll to access the lower prices.
IRS Health Insurance Tax Credits
The IRS has confirmed that the Health Coverage Tax Credit (HCTC) has been extended for all coverage months beginning in 2021. This means eligible individuals can receive a tax credit to offset the cost of their monthly health insurance premiums for 2021 if they have qualified health coverage for the HCTC. A health plan offered through the Health Insurance Marketplace is not qualified coverage for the HCTC.
Department of Labor Guidelines
The Department of Labor (DOL) has issued guidelines for payment of this credit which include the following key clarifications:
- Assistance Eligible Individuals, those who elect COBRA continuation coverage because of their own or a family member’s reduction in hours or an involuntary termination from employment, are not required to pay their COBRA continuation coverage premiums. The premium assistance applies to periods of health coverage on or after April 1, 2021 through September 30, 2021.
- The COBRA premium assistance provisions apply to ERISA governed group health plans sponsored by private-sector employers, state/local government or employee organizations (unions).
- When your COBRA premium assistance ends, you may be eligible for Medicaid or a special enrollment period to enroll in coverage through the Health Insurance Marketplace or to enroll in individual market health insurance coverage outside of the Marketplace.
- How will the premium assistance be provided? You will not receive a payment of the premium assistance. Instead, assistance the premium is reimbursed directly to the employer, plan administrator, or insurance company through a COBRA premium assistance credit.