Nearly a month after Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), millions of American workers and employers want to know if COBRA benefits will also be expanded. Currently, Congress is working on some relief legislation that may expand COBRA benefits. Learn more below about past legislation, current proposals, and how COBRA may be addressed during the COVID-19 crisis.
ARRA and COBRA Subsidies
In 2009, when the U.S. economy went into a recession, Congress passed the American Recovery and Reinvestment Act (ARRA). ARRA provided $24 billion to subsidize 65 percent of COBRA premiums for workers who were involuntarily separated between September 1, 2008 and May 31, 2010. Eligible workers were able to pay 35 percent of their COBRA continuation premiums for up to 15 months, whereas COBRA is usually 100 percent paid for by the employee.
Current Proposals for Expanding COBRA Benefits During the COVID-19 Crisis
Since March 15, 2020, nearly 22 million workers have filed for unemployment. Following the CARES Act, what could we expect to see with COBRA? Currently, the House of Representatives is working on a bill called “The Worker Health Coverage Protection Act,” which could have an impact similar to ARRA.
If approved, a federal subsidy may be more than 65 percent (possibly up to 100 percent, as proposed by the new bill) of COBRA premiums. That would mean that qualified employees could keep their coverage at a significantly reduced rate or possibly even at no charge. This would alleviate many people from having to shop on the open market for healthcare coverage and give them peace of mind in the immediate future.
One thing to consider is that if a subsidy is enacted, it may be adjusted by income level (similar to the stimulus payments). Also, whereas the ARRA subsidy lasted for 15 months, a new subsidy could be shorter or longer.
Expanded Eligibility for COBRA Benefits
Part of the new proposal would expand COBRA benefits eligibility. Under current COBRA law, employees become eligible after experiencing an event that would cause a loss of coverage, such as job loss or a reduction in hours.
The new proposal would also cover furloughed employees. If approved, the subsidy would pay the employee’s portion of the premium since the employer is still covering its share.
Length of Coverage
COBRA law allows up to 18 months of continuing coverage. Under the new bill, however, qualified employees may be able to keep their coverage for a longer period; plus, start dates could reach back as far as March 1, 2020.
If you are a DataPath Administrative Services client, rest assured that we are attentively monitoring proposed COBRA changes and subsidies. When the time comes, our COBRA administration solutions will be ready to support these changes. Following the passage of ARRA, we helped our clients effectively tackle the myriad adjustments; that experience gives us an enhanced ability to quickly make the necessary updates for COBRA compliance should there be new legislation or subsidies due to COVID-19.
Contact Your Elected Representatives
Millions of Americans need affordable healthcare coverage as the economic impact of COVID-19 takes its toll. To support new COBRA legislation and subsidies, contact your elected officials in Congress. Click here to search Congress.gov for your representatives.
DataPath Administrative Services is a full-service benefits administrator, offering COBRA management along with tax-advantaged account administration.