COVID Relief Bill May Increase Employer Health Care Costs

March 12, 2021

The recently-passed COVID relief bill includes employer COBRA subsidies that are unlikely to fully offset the cost of employees who take up the coverage, while adding further unemployment benefits that may make it harder to fill some positions as the economy recovers.

The bill, which passed without any GOP votes, includes:

  • Tax credits for employers for 100% of COBRA premium costs through September 30, 2021.  The credits are applicable to workers who are laid off or have reduced hours.

    • There is the potential for adverse selection and negative risk pool impacts as unhealthy employees are more likely to enroll in coverage when there is no premium cost for them.  CBO estimates at least 2.2 million people will enroll in COBRA coverage because of the subsidies.  Additional notification requirements will also increase compliance costs.

  • An additional $300 per week in unemployment benefits through September 6, 2021.  A report found 40% of small businesses had open positions in February they had not been able to fill.  However, economic research shows additional UI benefits had little or no adverse effect on job search.

  • The biggest changes to the ACA in ten years (see previous story).

Outlook:  President Biden and Congress will now begin drafting the next budget reconciliation bill, which is expected to include other health care reforms.