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Expansion of COBRA coverage under the American Rescue Plan

On Behalf of | Apr 30, 2021 | Employment Contracts, Unemployment Insurance Appeals

One of the first steps taken by the Biden Administration was the passage and signing into law of the American Rescue Plan. The multifaceted stimulus plan contains a variety of different provisions, including direct payments to most Americans, enhancement of unemployment benefits and an expansion of coverage under COBRA for residents of New Jersey and other states.

What is COBRA?

COBRA is an existing law that permits a worker the ability to continue employer-provided health insurance coverage for a set period of time after the end of employment. This includes any type of health insurance coverage provided to employees whether or not offered through written employment contracts. Historically, the employee has been responsible for paying what can prove to be a significant premium for this coverage.

American Rescue Plan and COBRA enhancement

The American Rescue Plan has enhanced the provisions of COBRA for workers who have been terminated from their jobs in two ways. First, for the period running from April 1, 2021, through September 30, 2021, employees are relieved of the burden of having to pay for their health insurance coverage. Employers are required to pay for that coverage during this time period.

Second, individuals who had been on COBRA but whose coverage had expired are able to restart that coverage for the above time period. The same relief from payment applies to these former workers as well.

American Rescue Plan, COBRA enhancement and employers

The goal of the American Rescue Plan is to make the COBRA enhancements cost-neutral for employers. Specifically, employers that fall under the provisions of the American Rescue Plan are provided a dollar-for-dollar tax credit for funds expended on the COBRA enhancement.

The time frame in 2021 for the COBRA enhancement appears to be firm; there is no indication that this enhancement will be extended. If employees or former employees have questions about how this legislation applies to them, they may want to ask a knowledgeable attorney.