The U.S. House of Representatives just passed President Biden’s $1.9 trillion “American Rescue Plan.” We now expect the bill to be taken up by the Senate under its reconciliation rules that will allow it to pass by a majority vote. Democrats are racing to get the bill to the President’s desk before extended unemployment benefits expire on March 14th. The legislation is one of the largest spending bills in history with the goal of strengthening public health and aiding the economy — primarily with a new round of $1,400 stimulus checks to individuals, an extension of unemployment benefits, $130 billion for schools, $350 billion for cities and states, and tens of billions for vaccines, testing and assistance to the healthcare system.
There are several provisions of the bill that could directly impact Employer Sponsored plans:
Federal Subsidies for COBRA Coverage
The legislation “allows workers who are eligible for COBRA due to involuntary termination or reduction in hours to receive coverage under their employment-based health plan with a premium reduction of 85%.” These subsidies will be available to workers beginning the first month following the date of enactment and will remain available through September 30, 2021. The provision also allows for an extended election period to allow individuals who previously experienced a qualifying event to enroll in coverage; requires employers to provide clear and understandable written notices to workers and establishes an expedited review process for workers who are denied premium assistance; and provides a payroll tax credit to allow employers and plans to be reimbursed for the full amount of COBRA premiums not paid by workers.
Increased Health Insurance Premium Tax Credit
In combination with COBRA subsidies, the legislation also temporarily increases the value of the health insurance premium tax credit, fully subsidizing health coverage available through Affordable Care Act (ACA) exchanges for people earning up to 150% of the federal poverty level and those on unemployment insurance. This provision also expands eligibility for subsidies to people making over 400% of the federal poverty level and caps their premium costs at 8.5% of income. This expansion of the premium tax credit would last for two years.