What is a COBRA subsidy?
Asked by: Kenny Swaniawski | Last update: November 1, 2025Score: 4.5/5 (71 votes)
What does subsidy mean in COBRA?
Q. How did the American Rescue Plan help laid off workers and their families afford COBRA? A. The American Rescue Plan Act provided subsidies to allow eligible individuals to maintain their job-based health benefits with no monthly premiums for up to six months.
How long does the COBRA subsidy last?
The subsidy is available for 9 months of coverage. The subsidy does not change or extend the overall COBRA continuation coverage, which is usually 18 months from the qualifying event.
How do I claim my COBRA subsidy credit?
Request a Refund for Amounts Paid in COBRA Premiums Exceeding Federal Employment Tax Liability: The employer may claim the Credit through an employment tax refund on the applicable employment tax return, generally Form 941, Employer's Quarterly Federal Tax Return.
What is COBRA coverage and how does it work?
COBRA applies to most private sector businesses with 20 or more employees. It requires an employer's group health insurance plan to continue after qualifying life events. These include: Termination or a reduction of a covered employee's hours.
COBRA Subsidy: Who’s Eligible, How it’s Funded, and How to Deliver Notices to Employees
Who pays for COBRA after termination?
COBRA and Cal-COBRA
COBRA allows former employees, retirees, and their dependents to temporarily keep their health coverage. If you get COBRA, you must pay for the entire premium, including any portion that your employer may have paid in the past.
What is the purpose of a COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, ...
Who is not eligible for COBRA?
Why would an employee not qualify to enroll in Cal-COBRA? The employee is enrolled in or eligible for Medicare. The employee does not enroll within 60 days of receiving the notice of eligibility from the employer. The employee is covered by another health plan.
What is a subsidy credit?
Basically, the government will pay for part of the premium and you will pick up the rest. The amount the government pays initially is dependent on your estimate of what your annual income is expected to be during the year that you apply for health insurance.
Is COBRA refundable?
Premium payments for your COBRA health insurance continuation coverage, will coverage for a full month. Major medical plans will most often start on the first of the month and end on the last day. Generally, there are no refunds when you cancel your plan early.
Is COBRA a monthly payment?
The plan must allow qualified beneficiaries to pay the required premiums on a monthly basis if they ask to do so, and may allow payments at other intervals (for example, weekly or quarterly). Plans cannot require qualified beneficiaries to pay a premium when they make the COBRA election.
Can an employer subsidize COBRA?
Employers can choose how COBRA subsidies are paid. In some circumstances, employees can pay for their COBRA premiums from their severance payments on a pre-tax basis.
Why is COBRA so expensive?
COBRA coverage is not cheap.
Why? Because you're now responsible for paying your portion of your health insurance: The cost your employer contributed to your premium, in addition to the 2% service fee on the cost of your insurance.
What happens when COBRA subsidy ends?
You can continue on COBRA unsubsidized until your 18 months of COBRA eligibility ends. In addition, you will have the option to enroll in marketplace coverage when the subsidy ends in September. Loss of the COBRA subsidy will make you eligible for a special enrollment period (SEP) to sign up for marketplace coverage.
Is a subsidy a payment?
A subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut.
Is COBRA subsidy taxable?
No you do not have to report the COBRA assistance as income.
Who qualifies for subsidy?
- In states that have expanded Medicaid coverage, your household income must be below 138% of the federal poverty level (FPL) to qualify.
- In all states, your household income must be between 100% and 400% FPL to qualify for a premium tax credit that can lower your insurance costs.
What is the purpose of a subsidy?
Subsidies are payments, tax breaks, or other forms of economic support given by governments to certain industries or economic sectors. The goal of subsidies is to aid or support what are deemed to be key parts of the economy or national infrastructure.
Do you have to pay back a subsidy?
If you increased your income within the tax year, you may have received a larger credit than what you should have. In this case, you need to pay back a portion or all of the money you received from the government. If you earned less income than estimated, you may be entitled to a higher tax subsidy.
Can I get COBRA if I quit?
Whether you quit, get fired or are laid off, you may be able to choose your former employer's health plan under a federal law called COBRA. That stands for Consolidated Omnibus Reconciliation Act. It's available if: You were enrolled in an employer-sponsored medical, dental or vision plan.
Who pays for COBRA coverage?
Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves.
How do I know if I qualify for COBRA?
Q6: How do I become eligible for COBRA continuation coverage? To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees.
What are the disadvantages of COBRA coverage?
- COBRA can be expensive, especially compared to the premiums you were paying before your qualifying event. ...
- COBRA does not apply to all employer-sponsored health plans—in particular, those organizations with fewer than 20 employees may have no requirements. ...
- Even if you get an extension, COBRA is only temporary.
What are 3 facts about COBRA?
Cobras come in varying colors from black or dark brown to yellowish white. They have specialized muscles and ribs in the neck that can flare out when the cobra feels threatened. Cobras are able to raise their body up, spread the hood, and hiss loudly to scare off most threats.
How much does COBRA cost?
COBRA insurance typically costs 102% of the total health plan premium. This includes both the employee and employer contributions, along with a 2% administrative fee.