April 12, 2021

Not just $1,400 checks: 5 new health care, FSA, insurance and COBRA savings in the stimulus law

With the new stimulus bill, you may be able to save money on health insurance…

With the new stimulus bill, you may be able to save money on health insurance plans this year.


Sarah Tew/CNET

You’re probably familiar with the $1.9 trillion stimulus law that includes a third stimulus check for up to $1,400 per person, a child tax credit for up to $3,600 per kid (how to calculate your child credit total) and several other tax breaks for people who are unemployed, low-income or have kids. But the American Rescue Plan Act also contains important updates and tax breaks for medical care and health insurance that could benefit your family. 

For example, people with health care flexible spending accounts can contribute more funds tax-free this year. And those with medical expenses can deduct more money on their 2020 tax return, so long as you file by the new May 17 deadline. Perhaps most importantly, there are new options for people who need health insurance, and resources to help lower costs for those who are already insured. 

Here’s everything you need to know about the stimulus bill health benefits that could save you money this year. Plus, here’s when you can expect your third stimulus check, what we’ve heard so far about a potential fourth stimulus check and 9 weird stimulus check facts. This story was recently updated.

Put more money in health flexible spending plans, tax-free

If you have a health care FSA, good news: The limit for tax-free contributions has increased to $2,750 — up $50 from last year. The change was part of the IRS’s annual inflation adjustments. That means you can contribute more money to your account without getting taxed on it.

Deduct more of your medical expenses

Some medical expenses are tax-deductible — and Congress passed a more generous allowance for what you can deduct as part of the December stimulus law. Instead of capping expenses that exceed 10% of your adjusted gross income, as was originally planned, you can now deduct medical expenses that exceed 7.5% of your AGI. You can find the full list of medical expenses you can deduct on the IRS’s website, including doctor’s fees and inpatient hospital care.


Now playing:
Watch this:

Your tax questions answered in 3 minutes



3:26

Free COBRA insurance premiums until September

Typically, if you lose your job, you can buy insurance coverage through your former employer under the government COBRA (Consolidated Omnibus Budget Reconciliation Act) program. However, you typically have to pay the full price for that insurance, which can be very costly. But under the March law, the government will pay the entire COBRA premium from April 1 through Sept. 30 for laid-off employees and family members. (However, you’re not eligible if you have Medicare, if you left your job voluntarily, or if you qualify for new, employer-based health insurance somewhere else before that date.) 

The stimulus bill requires employers to send former workers who qualify for COBRA a notice of eligibility. But if you haven’t gotten that, you can call your former employer to make sure you are signed up for coverage. 

009-cash-money-stimulus-checks-bill-passed-congress-1400-dollars-payment-target-supplement-bullseye-2021-biden

You might be eligible for free COBRA insurance coverage for the next six months.


Sarah Tew/CNET

Sign up for cheaper health insurance

Under the stimulus bill, you may be eligible for new short-term health insurance subsidies to buy coverage on HealthCare.gov. Nearly everyone who buys their own insurance through the Affordable Care Act will be eligible for a discount, according to a New York Times report

The bill broadens the subsidies available under the ACA for health insurance, so people who are already eligible can receive more, and those whose incomes were previously too high to qualify can also get assistance. For example, if your annual income is around $19,000, you’ll be able to sign up for a plan with no monthly payment. If you earn over $51,000, your premium could get lowered by as much as $1,000 a month in some markets, the Times reported. (For most people, eligibility for subsidized health insurance is calculated using your household’s modified adjusted gross income, according to the UC Berkeley Labor Center). 

To get the new benefits, you need to sign up for plans at HealthCare.gov, or, for some states, their own insurance marketplace websites. The changes will be retroactive to Jan. 1, 2021. So if you’re already on a medical plan through the Affordable Care Act, you’ll get money back as a refund when you file your 2021 tax return next year.

The American Rescue Plan Act funds these new subsidies for two years. 


Now playing:
Watch this:

Stimulus check 3: How much money you’ll get



2:32

Take advantage of open insurance enrollment through August

While you usually need to wait for the six-week open enrollment period each fall to sign up for health insurance, the American Rescue Plan Act created a special enrollment period that runs through mid-August. Most state marketplaces have done the same. That means you can go to HealthCare.gov or your state option and sign up for insurance now if you need to, and can take advantage of the new subsidies and changes. 

For more, check out who qualifies for the expanded child tax credit, and 7 other ways you could get more money back on your tax refund this year