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Free COBRA for Unemployed Texans

Is COBRA health coverage free for most unemployed Texans as of April 2021? The shocking answer is yes.

Thanks to a new law, most Texas employees who recently lost their jobs will qualify for free COBRA (continuing healthcare coverage) from April to September of 2021.

The recently-passed American Rescue Plan Act (ARPA) contains a dense thicket of bureaucratic language, perhaps that is why the extremely generous new policies affecting COBRA health insurance plans have gone largely unnoticed so far. 

In short, ARPA fully funds COBRA health insurance plan payments for qualifying individuals between the dates of April 1, 2021 and September 30, 2021.  Importantly, the 18- and 36-month limits to coverage still apply, and the subsidies are not available to employees who voluntarily left their job. 

What is COBRA?

Under normal, non-pandemic circumstances, most employees who separate from their jobs have the option to remain on their employer-sponsored health insurance by enrolling in a COBRA plan.  While the individual’s coverage remains the same under COBRA, the out-of-pocket price rises significantly because it becomes the individual alone who pays for the plan (plus an additional 2% administrative fee).  Considering that the average annual cost of an employer-sponsored health insurance plan is about $7,200 for an individual and $21,000 for a family, this is simply out of reach for most people, especially those who just lost their jobs. 

Generally, employees are permitted to enroll in a COBRA plan for 60 days following their employment separation.  An employee and any family members who are validly enrolled in a COBRA plan are also generally permitted to remain on COBRA for 18 months.  One exception is when the employee becomes eligible for Medicare while on COBRA, in which case the employee will transition from COBRA to Medicare while their family members are still permitted to remain covered by COBRA for 36 months rather than just 18.

COBRA can be a beneficial option for those who can afford it because:

COBRA is not available for all employees, though, because it only applies to companies that have 20 or more employees.  In response, many states have passed their own version of COBRA that applies to businesses with fewer than 20 employees.  These are known as mini-COBRA plans, and they closely mirror the national COBRA program, though there are fluctuations from state to state.  Texas has a mini-COBRA plan which provides 9 months of coverage.

What does the new Federal COBRA law change in Texas?

ARPA’s most notable COBRA policy change is that it fully subsidizes COBRA premium payments for eligible employees and their family members who are enrolled in a COBRA plan between April 1, 2021 until September 30, 2021.  This bears repeating: if you are currently on COBRA or eligible for COBRA coverage, you and your family are entitled to 100% subsidized payments until the end of September 2021.  The subsidies are apparently going to cover mini-COBRA payments as well.

ARPA also alters some eligibility criteria for COBRA.  While the 18- and 36-month limits still apply, employees who chose not to sign up for COBRA within the 60-day window now can reverse their decision and choose to enroll themselves and their families in a COBRA plan.  Importantly, an employee who quits a job rather than having their employment terminated is not eligible for any ARPA subsidies, though they are still eligible for a typical, paid COBRA plan. 

In other words, free COBRA is another reason to not quit your job if possible. 

What does this mean for unemployed Americans?

If you were terminated from a job and do not yet have access to another insurance plan, you can now enroll in COBRA and pay no monthly premium until the end of September.  If you voluntarily left your job, however, you are likely not eligible for any subsidies.  More information and helpful guidelines will be published by federal agencies by May.  Until then, tell a friend.