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$0 COBRA and ARPA, How it works and if I should take it...

This past year has been pretty rough. If you've been laid off, the question of what to do with your health insurance may seem like a daunting task. This outline will bring you up to speed on some of the protections you have as an individual and provide you a roadmap on what to do next for your family within the current environment.

1985 - COBRA

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, was first enacted in 1985 as a way for employees to not fret about losing health insurance if they lose employment. If someone had preexisting conditions or had satisfied their deductible, at the minimum COBRA gave you access to your prior employer's coverage at full cost for at least 18 months. For many Americans, historically, COBRA was looked at as a warm blanket to rely on as other parts of their life were in transition. The problem is paying the premium is often unattainable. This challenge has caused those who can foot the bill to pay way more than a similar solution elsewhere. Alternatively, those that can't swing it, they are forced to drop coverage and stress about what-if scenarios.

2010 - Affordable Care Act (ACA)

With the passage of the ACA in 2010, the introduction of the Special Enrollment Period gave certain rights to consumers who lose their insurance through work to not be stuck taking COBRA. Prior to the ACA if you had a preexisting condition, COBRA was the only option that would allow your existing conditions to be covered. Enrolling in stand-alone health insurance could be denied based upon preexisting conditions. With the ACA, preexisting conditions were thrown by the wayside in the individual landscape, and the special enrollment periods allowed someone who lost employer coverage to hop into the individual market no questions asked for 60 days.

In addition to eligibility, for the ACA, price is largely driven by household income. So in events where you are laid off, and your income reduced, the Affordable Care Act comes into scope as a viable alternative to COBRA.

2021 - American Rescue Plan Act (ARPA)

More commonly known as the $1,400 per person stimulus bill, The American Rescue Plan Act (ARPA or HR1319) is a comprehensive package to help both businesses and families across the US. We read it cover to cover, so clicking the preceding hyperlinks will take you to different benefits for both. This article will focus on the COBRA and unemployment healthcare waivers afforded to consumers.

As mentioned in the COBRA section, COBRA provides consistency the rest of your life is in transition. The traditional hurdle has been driven by costs. So the new COBRA provisions in ARPA can sound promising for most.


Under Section 9501 of ARPA, the cost of COBRA is going down to $0 for employees who lost coverage through no fault of their own. Effectively, if you are let go from an employer that employer is responsible to pay your premiums for you and they receive a dollar for dollar deduction on their quarterly payroll taxes that they pay the IRS. This benefit goes through September 31st allowing consumers to hang onto their current coverage for the next few months while they seek new employment. This insulation is a welcomed benefit for consumers looking to stay status quo for a few months.

Alternative - Unemployment Waiver

With staying status quo at $0 per month being an option, why would I do anything else? Here's why... Under Section 9663 of ARPA, instead of looking at a loss of employer-based coverage as the triggering event, the law states: In the event, the taxpayer is approved to receive unemployment compensation for any week in 2021, household income will not be taken into account to determine individual health insurance premiums.

What does this mean? At an extreme, a client PAHA represents was an executive-level worker. He was let go in the last three months of 2020 with a severance of $12,000 per week through the last week in March 2021. Upon his severance pay ending, he is indeed eligible for unemployment, albeit not at $12,000 per week. That eligibility, even if doesn't file a claim, means that any income beyond $18,100 for the year is ignored for purposes of health insurance affordability. This creates an opportunity for him to both find $0 premium options(the appeal of COBRA) but through the end of the year, not September 31st. AND, with several of those options being $250 and $500 deductible solutions.

Real World

Bonnie and Clyde(changed for obvious reason) were each laid off due to covid. Bonnie first was let go in December 2020. Because of this, she and Clyde quickly shifted to Clyde's employer plan for 2021. Clyde takes a high-cost medication Actemra, that without help from the manufacturer, costs $1,213 per shot, and he has two per month. Healthcare is pretty important to them. January through March Bonnie had been collecting unemployment until Clyde was also laid off forcing them to weigh COBRA over ACA coverage. Because at least one adult in the household has already collected unemployment in 2021, not only were they eligible to make a shift away from COBRA, but they are eligible for a plan through Pennie that is $0 premium, $0 deductible, $1 copays for the family doctor and $20 copays to Urgent Care. This plan is through Highmark and covers all preexisting conditions, preventative care, and does so through December 31st without fluctuation. See their quote here.

View Plan Details _ Pennie
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COBRA may be this warm and fuzzy blanket of coverage that you know. AND, it may cost $0 for a few months. If you are certain that this is only a short-term solution that for sure will be addressed by September 31st, then we say go for it. But, it never hurts to check out the alternative that gives you more time, potentially better benefits, and still with several options at $0 per month.

Not sure where to start? We are happy to have a conversation. Just complete our intake here and you will be invited to a 20-minute conference call to fill in any gaps we see to make viable recommendations.

Happy Friday!



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