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COBRA Health Insurance 100% Subsidized Through September

COBRA Health Insurance 100% Subsidized Through September

President Biden signed the American Rescue Plan Act today, passed by Congress just yesterday, providing a full 100% subsidy of COBRA insurance premiums for employees who lost their jobs as a result of COVID-19, as well as covered relatives, through September 30, 2021.

The original House bill had actually called for an 85% subsidy, but the Senate increased it to 100%. The bill was signed earlier today by

Beginning April 1, 2021, employees who were laid off or had their hours reduced due to the pandemic can stay on their former employer’s health plan through COBRA (Consolidated Omnibus Budget Reconciliation Act). Employees dismissed for other reasons or who voluntary resigned are not covered by the bill.

The maximum period for the subsidy is 6 months, and may end sooner if the usual 18-month period of coverage ends before September 30 or if the employee becomes eligible under another plan, including Medicare.

What employees should know

Employers may offer laid-off employees the choice of other group health plans they offer, though the premium cannot exceed that of the employee’s original plan. Employees have 90 days from receiving a COBRA notice to choose.

In the case of fired employees who choose to keep their employer-sponsored health plan for up to 18 months, employers may require they pay for the full cost of COBRA coverage, plus a 2% administration charge, though the option is likely unaffordable for anyone unemployed.

What employers should know

The ARAP subsidy will be given to employers in the form of payroll tax credit against their quarterly taxes, to be used for COBRA.

In cases where the tax credit is greater than the payroll taxes, it will be refundable when employers file their quarterly tax returns. Other options may be issued by the Treasury Department.

Employers are strongly encouraged to review and possibly revise their existing COBRA policy to ensure full compliance with the new Act.

Additionally, employers should keep abreast of regulatory guidance to ensure they maximize their entitlement and avoid adverse financial consequences.

For any questions or assistance, contact us.



Andrew Kimler heads Vishnick McGovern Milizio LLP’s Employment Law, Commercial Litigation, and Alternative Dispute Resolution Practices and is a key member of the LGBTQ Representation Practice. He can be reached at akimler@vmmlegal.com and 516.437.4385 x122.