Stimulus Bill Makes COBRA Health Coverage More Affordable

Workers who lose the health insurance their employers once provided may now have an easier path to near-term coverage.

Millions of Americans have lost their jobs over the past 12 months, but for many, unemployment doesn't just mean losing a paycheck -- it also means losing health insurance.

Normally, workers who lose their employer-sponsored insurance have the option to keep their healthcare plans through a program called COBRA. Short for Consolidated Omnibus Budget Reconciliation Act, COBRA allows workers to continue their employer coverage for up to 18 months. But there's a catch -- they must pay for their health insurance premiums completely out of pocket.

Usually, companies that provide health insurance to employees cover the cost to some degree. Many employers even pick up the bulk of the tab, or pay the entire amount -- but only while a worker is employed. As such, jobless workers who want to keep their health coverage through COBRA often find that it's just not doable financially.

Last year, the average annual premium for job-based health insurance was $7,470 for individuals and $21,342 for family coverage, according to the Kaiser Family Foundation. As such, a lot of people who would normally want COBRA simply can't pay for it.

The new $1.9 trillion coronavirus relief bill changes that, though -- in a good way.

COBRA subsidies ease a huge financial burden

The new relief bill comes with a number of important provisions to help Americans get through the pandemic -- things like extended unemployment benefits and $1,400 stimulus checks. But the bill also includes a provision for subsidizing COBRA premiums for those who lost their health insurance involuntarily because of job loss and don't qualify for another employer plan or Medicare.

Specifically, the Senate bill that's already been voted on calls for a 100% subsidy of COBRA premiums, which, frankly, is huge. Jobless workers on COBRA would still be liable for other out-of-pocket costs under COBRA, like deductibles and copays, but that would hold true even if they were still working and their employers were subsidizing their premiums.

Now the only catch here is that these COBRA subsidies won't last forever. It's expected that they'll begin in early April and continue through September. Given that it's possible to be on COBRA for up to 18 months, those who start COBRA coverage in April could end up having to pay for many months of unsubsidized premiums if they stay on it for the full year and a half. But many people who are out of work will, ideally, not remain unemployed for 18 months. And once they're hired elsewhere, the need for COBRA may no longer exist as they transition onto their new employers' plans.

Of course, COBRA isn't the only health insurance option for people who lose their jobs. It's possible to buy a plan on the healthcare exchange that could have a much cheaper premium. The benefit of COBRA, however, is getting to retain the same coverage without having to switch providers.

Many jobless Americans have exhausted their savings in the course of the pandemic and can't afford the high cost of COBRA, even with boosted unemployment benefits. So these new subsidies could be a real game-changer and help many people protect their health as we continue to navigate the pandemic.