Always Read the Fine Print: American Rescue Plan Act Gives Unemployed Texans Free COBRA

Section 9501 of the recently passed American Rescue Plan Act (“ARPA”) fully funds COBRA health insurance plan payments for qualifying individuals between the dates of April 1, 2021 and September 30, 2021. This benefit is funded by the employers who will then receive a tax credit to offset the cost of COBRA coverage. Notably, the benefit is not available to employees who voluntarily quit their job or who were terminated on the basis of “gross misconduct,” and the 18- and 36-month limit to coverage still apply. 

Before the world of COVID-19, nearly all employees who separated from their jobs had the option of electing to remain on their employee-sponsored health insurance by enrolling in a COBRA plan. I say “nearly all employee” because COBRA is only available to employee who worked for a company that employs 20 or more employees. However, Texas has passed its own version of COBRA known as “mini-COBRA,” which applies to businesses with fewer than 20 employees and only provides 9 months of coverage. 

Generally, employees are permitted to enroll in COBRA within 60 days from their employment separation. Once an employee enrolls in COBRA, the employee is usually permitted to remain on COBRA for 18 months, unless (1) the employee is only eligible for mini-COBRA, which would only permit the employee to remain on COBRA for 9 months or (2) the employee becomes eligible for Medicare while on COBRA, in which case the employee will transition from COBRA to Medicare while his or her family members are permitted to remain covered by COBRA for 36 months rather than just 18 months. 

While electing COBRA benefits is fairly expensive because it becomes the employee alone who pays for the plan, it can be extremely beneficial as it allows the individual who enrolls in a COBRA plan to keep his or her coverage without interruption. 

In one fell swoop, the ARPA fully subsidizes COBRA premium benefits for eligible employees and their family members who are enrolled in a COBRA plan between April 1, 2021 and September 30, 2021. In other words, if you are currently on COBRA or are eligible for COBRA coverage, you and your family are entitled to 100% subsidized payments until the end of September 2021. The subsidy also applies to mini-COBRA payments. 

Lastly, while the 18- and 36-month limits remain untouched under the ARPA, employees who failed to elect COBRA continuation within the 60-day window now can reverse their decision and choose to enroll in a COBRA plan.

Ultimately, if you were terminated from your job and do not have access to another insurance plan, you can now enroll in COBRA and pay no monthly premium until September 30, 2021. Notably, however, if you voluntarily left your job or would terminated based on “gross misconduct,” you would not qualify for the subsidy under the ARPA. During these uncertain times, health coverage is critical. Take advantage of this benefit and share the news with your family, friends, and foes. 


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