The third stimulus bill, the American Rescue Plan Act, offers a COBRA subsidy that requires employers to pay the full cost of COBRA benefit premiums for former employees between April 1, 2021 and September 30, 2021. Employers then receive a payroll tax credit from the federal government. Read on to understand if you are eligible for this benefit and how it works.

What is COBRA?

COBRA, Consolidated Omnibus Budget Reconciliation Act, generally requires employers with more than 20 employees to offer health benefits to employees and their families after or during certain life events when coverage would otherwise end. For instance, if you are laid off or your hours are reduced, your employer would offer you the opportunity to elect COBRA benefits for up to 18 months so that your group health benefits do not immediately end. COBRA benefits are also available life events such as divorce, death, and transition between jobs.

As an employee, your employer may be paying a portion of your group health benefits as part of your compensation package. In some circumstances or severance agreements, an employer may offer to continue to pay for a portion of COBRA benefits. However, by law, qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost of the plan. 

What are the 2021 COBRA subsidy benefits?

Starting April 1, 2021, the COBRA subsidy requires that employers pay 100% of COBRA premiums between April 1, 2021 - September 30, 2021. This includes dependent coverage so long as that dependent was previously covered on the employers’ policy. The employer is then reimbursed for these benefits through a payroll tax credit.

2021 COBRA Subsidy Benefits Eligibility

In order to qualify for the employer paid subsidy benefits, you must meet the following criteria:

• Involuntarily terminated or if you lost health insurance because of a reduction in hours. If you quit your job or were terminated for gross misconduct, you are not eligible for the paid employer subsidy.
  
• You must have lost your job in the last 18 months. COBRA has an 18-month window which means that you can get between one to six months of paid medical insurance premiums between April and September. If you lost your job on April 1, 2020 you would be eligible for COBRA until September 30, 2021 and would be eligible for all 6 months of the employer paid subsidy. 
  
• You can elect COBRA coverage even if you declined it previously. Your previous employer must allow you to now opt in for coverage if you have any time remaining.
  

Keep in mind, you cannot receive the employer paid COBRA subsidy if you are offered group health insurance through another plan or Medicare. For instance, you could not receive the COBRA benefits if you have the opportunity to join another health plan when you find a new job.

What to Do If You Think You Are Eligible

If you qualify for COBRA subsidy, you should receive a written notice from your employer and/or the group health plan administrator. The notice will include your eligibility period, your new benefits under the Rescue Plan and your right to choose to elect or continue benefits. You then have 60 days to accept coverage or lose all rights to the benefits.

Severance Agreements and Employment Law

Another important note is that you are entitled to these benefits under the law. If you are considering a severance package or being asked to sign an exit agreement, your employer cannot deny these benefits and you should not sign any document that waives your rights to these benefits. 

Before you consider accepting an offer, you must have an experienced employment law attorney review it and negotiate for better terms on your behalf. At Brandon J. Broderick, Attorney at Law, our award-winning employment attorneys represent clients in employment separation, discrimination, sexual harassment, wage violations, and more in both New York and New Jersey. Contact us today for a free consultation.