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Is There Free Health Insurance Coverage Under the American Rescue Plan Act?

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The new, federal law, the American Rescue Plan Act of 2021 [“ARPA”], requires employers to pay health insurance premiums for terminated employees who otherwise, under COBRA, would have to pay the premiums themselves. Under COBRA (a 1985 federal law that provided for continued health insurance coverage), employees who were involuntarily terminated (did not quit), could continue their coverage through their previous employer’s plan so long as they paid the full premium charged for their coverage by the insurance company. ARPA, on the other hand, provides a considerable benefit in that under it the employer pays the full premium. Here is how the ARPA health insurance assistance works:

  • Employees are eligible for paid coverage if involuntarily terminated or subject to reduced work hours, and they elect “COBRA” with their employer and its insurer.
  • Employees may elect COBRA even if outside of the ordinary COBRA election period, so long as they were involuntarily terminated and at the time of election are without access to coverage through a new employer.
  • The ARPA coverage assistance period runs from April 1, 2021 through September 30, 2021.
  • The employer or health insurance company is responsible for paying the premiums for the employee, and such premium payments will be recoverable by the payors through tax credits when they file their quarterly federal tax returns.

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