While the $1,400 dollar stimulus payments have received the big press coverage, the recently passed American Rescue Plan Act of 2021, signed by President Biden, offers a less publicized but important option that can help workers obtain “Free COBRA” coverage. This crucial benefit is available to people who are unable to work due to a work injury. The “Free COBRA” provision requires employers to fully fund COBRA continuation coverage from April 1, 2021 until Sept. 30, 2021.
Background Concerning Free COBRA Coverage
When an employee is terminated or laid off for any reason other than gross misconduct, they are allowed to continue their health insurance coverage through their employer under a law referred to as COBRA. There are a couple of obstacles for most people to continue health coverage.
First, you must have been enrolled in the health plan before termination. The second – and usually far greater problem – is that you must pay the full cost yourself with no employer contribution. This typically runs about $600 per month for an individual and can run up to $3,000 per month for a family plan, which many people cannot afford, especially if they are out of work or receiving reduced benefits per workers’ compensation. These benefits can be extended for 18 months if the employee pays the full cost.
The recently enacted American Rescue Plan eliminates the employee having to pay for COBRA benefits. The employer must fully pay for this benefit up through at least Sept. 30, 2021. This is so even if the employee did not elect COBRA coverage previously because they couldn’t pay it prior to April 1, 2021. While this does not extend the typical 18-month period for COBRA coverage, it is an incredibly valuable benefit for those who had their health insurance through their employer and were either laid off or left their job for anything other than voluntary termination.
For an injured worker, this could be immensely important because they will be able to retain health insurance, even if they were terminated because of their injury, if their COBRA or health insurance period ran out due to the FMLA, or if due to other employer policy-ending coverage. These workers will no longer have to pay the full COBRA amount. Instead, the employer will pay the full premium. The way the law is written, it’s actually the federal government who pays this amount because the government is issuing tax credits to the employer for the costs of these plans. So, there is unlikely to be significant resistance from employers identifying and reimbursing employees for this COBRA coverage.
What are the Possible Exceptions to Free COBRA Coverage?
There are, of course, a couple of exceptions. The first and most important is that you were enrolled in your health plan prior to your termination. If you never enrolled in the health plan, there is no obligation to continue COBRA and the free COBRA would not apply.
Secondly, if the employee was terminated for gross misconduct or voluntarily left the employment, then the free COBRA provision would not apply.
Finally, it does not extend the COBRA time beyond the usual 18-month period, meaning that if the COBRA time (18 months) has already run since the termination, the employee is out of luck.
Why This Program Is Important
One of the largest concerns when someone is injured and out of work is how they are going to pay for their healthcare costs if they no longer have employer-provided insurance.
With the new “Rescue Plan” employees have a new, cost-free possibility of continuing their health coverage, even if they are out of work and cannot afford the usually prohibitive costs of COBRA coverage.
Employees should be getting a notification from their employer telling them that they are allowed to elect this coverage. We recommend that in almost all circumstances, our clients should choose to do so. The only exception would be if they receive low-cost or free insurance through a spouse’s healthcare, Medicaid, or some other government program. Otherwise, with the new plan in place, you can maintain insurance coverage without the expense, so you can get the care you need.
How Does It Affect Injured Workers?
For injured workers with an accepted claim, this continued coverage will give peace of mind for other illnesses and injuries not covered by workers’ compensation. For those with denied cases, they can use this coverage to get treatment for their injuries.
The government will be issuing regulatory guidance in the next several weeks laying out the parameters of the program, but so far, there is nothing to indicate injured workers will be excluded. We know how important it is for everyone to have access to medical care and encourage you to share this article with any friends and family who might benefit.