UPDATE: COBRA Continuation Coverage Assistance Under ARRA

In February and October 2009, the Quatrini Rafferty blog authored posts detailing COBRA assistance through the American Recovery and Reinvestment Act of 2009 (aka: Stimulus Bill.) This is intended as a follow-up. The following article was posted on the U.S. Department of Labor's website:

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 (2010 DOD Act) provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA.

Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit.

To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

For more information, visit the Department of Labor's website:

http://www.dol.gov/ebsa/cobra.html

- Quatrini Rafferty -

COBRA Subsidy Set to End; Effect of Health Care Bill?

In February, the Quatrini Rafferty blog posted several articles on federal subsidies for COBRA premiums.

With the COBRA program entering its eighth month, and with the subsidy set to end at the end of 2009, National Public Radio discusses the success of the program and its future.

Health Insurance Help For Laid-Off Workers May End

by Sarah Varney

If you have ever lost a job and the health benefits that went with it, you have probably heard of COBRA, the program that requires employers to extend your health coverage for a price.

That price, however, is one that all but a fraction of laid-off workers find much too high. The federal stimulus bill has helped some workers by lowering those payments, but that help may soon run out.

Nicole Pelton, who lost her job in March as a marketing manager in Silicon Valley, says she doesn't want to worry about taking her kids to the emergency room and having no way to pay for it. After the shock of being unemployed eased, she says she worried most about keeping her young family insured.

Help From Subsidy

That's where COBRA comes in — or at least it's supposed to.

"That was going to be about little over $1,000 a month. That was probably more than half the unemployment benefits," Pelton says.

Like countless unemployed people before her, Pelton found that the COBRA coverage was out of her reach — she would have to pay the entire premium.

Then, she found out the federal government would cover two-thirds of the cost for nine months, through a new program approved by Congress in February as part of the stimulus bill. She signed up, and now she pays about $350 a month to cover her family. It is still a big expense, but Pelton and her husband have managed to pay the bill.

"The subsidy came at a good time because it was very expensive, the monthly amount we paid," she says.

The subsidy appears to be having the effect Congress and the Obama administration wanted. No one really knows yet how many people have actually signed up for COBRA. One survey of large companies found that the percentage of eligible laid-off workers who continued their employer health insurance doubled from 19 percent to 38 percent after the subsidy kicked in.

But if the government is picking up most of the bill, why isn't the program even more popular?

Still Expensive

Marian Mulkey, a COBRA researcher at the California Health Care Foundation, says the newly unemployed are being asked to pay 35 percent of the cost even though they don't have jobs.

"That's still a large cost you're being asked to maintain month after month, when you're doubtless facing many other economic challenges and balancing your household budget," Mulkey says.

That's not possible for many families. Even with the federal subsidy, a parent earning minimum wage would still need to pay about a third of her monthly income to afford family coverage. Mulkey says that to make the COBRA coverage more affordable, the subsidy needs to be higher.

Rohan Vaidya earns far more than minimum wage. He was laid off from the software giant Oracle in January. His COBRA subsidy expires in November, and his health coverage will go from $140 a month to $400. Vaidya says he will switch to a cheaper plan.

"I'm 28 years old. I'm relatively healthy, so I don't need comprehensive everything — health, dental and vision," he says. "So something basic is what I'll sign up for."

Under current plans, the COBRA subsidy will expire Dec. 31. Congress may consider extending the subsidy early next year, though there are no details yet on how long it might last.

But all this could be moot if Congress passes even a modest health care bill. Unemployed workers and others who are uninsured could be given a choice of more affordable health plans. There would be government subsidies for those who can't afford it, and insurance companies couldn't deny families like Pelton's because of pre-existing conditions.

In effect, the need for COBRA could simply go away.

You can also listen to the program or download the Podcast here

- Quatrini Rafferty -

UPDATE: Stimulus Bill Expands COBRA Coverage

The following article was written by Quatrini Rafferty partner, Vincent J. Quatrini, Jr., and will appear in the forthcoming Spring 2009 QR Newsletter

COBRA: THE STIMULUS LAW PUTS MEDICAL INSURANCE WITHIN REACH

COBRA is the federal law that requires Employers to allow separated employees to purchase medical insurance through the company group plan for up to 18 months after separation, at 102% of what the company is paying for that insurance.

Up until now, that 102% was well beyond the financial reach of almost all displaced workers. The new stimulus law, pushed by President Obama, and signed by Congress,provides real financial relief to displaced workers who want to stay in the company plan.

With the stimulus package, the government agreed to pay 65% of COBRA premiums for people who receive pink slips between Sept. 1, 2008 and Dec. 31, 2009. The subsidy is limited to nine months and available only to those without another source of group health insurance.

Individuals who lost jobs after Sept. 1, 2008, but who did not sign up for COBRA at that time will get a second chance to do so. Employers must send these former workers a notice by mid-April. These workers have 60 days after receipt of the notice to pay into the plan.

Eligibility does not depend on income. But individuals with income over $124,000 will have to pay tax on the subsidized amount.

The subsidy money will not come to you directly. It will be sent to your employer in the form of an offset against payroll tax liability. You send in your payment of 35 % of the premium to your former employer and the government will credit the remaining 65% of the premium against your former employer's payroll tax.

For most people, the subsidies will start March 1. If you are already in the COBRA plan with your former employer, you will not receive reimbursement for any COBRA payments you made between Sept. 1 and March 1.

These are just the highlights. Many details still have to be worked out. Quatrini Rafferty suggests that if you do not hear from your former employer in the next 45 days that you contact your employer and find out who is administering their COBRA benefits. If that doesn't work, try the Employee Benefits Security Administration, a unit of the U.S. Department of Labor, at 866 - 444 - 3272.

Stimulus Bill Expands COBRA Coverage

The new Stimulus Bill signed into law by President Obama includes an unprecedented expansion for COBRA, the federal statute that provides workers and their families with access to 18 months of health benefits from their previous employer.

To this point, the former employee had to pay for his or her portion of what the employer once paid on their behalf. The new legislation lends a hand to the former employee, funding up to 65% of the COBRA premium for those who became eligible for COBRA coverage between Sept. 1, 2008 and Dec. 31, 2009. The legislation also gives the recently unemployed a second chance to enroll in COBRA coverage.

An online article in the The City Wire (http://www.thecitywire.com/index.php?q=node/2977) does a nice job of breaking down the details of the plan:

Employee Eligibility

Individuals who have been involuntarily terminated between September 1, 2008 and December 31, 2009 with annual incomes less than $125,000 (single) or $250,000 (couples) are eligible for the COBRA premium assistance, along with their family. Qualified individuals, who initially decline COBRA coverage, would be given an additional 60 days after they receive notice of the special election period to elect to receive the subsidy. The election period begins on the date of enactment of the ARRA.

Special Enrollment

The bill allows group health plans to provide a special enrollment right to allow eligible individuals to elect different coverage under the plan in electing COBRA continuation coverage.

Notice Requirements

COBRA notices must include information on the availability of the premium assistance. Model notices from the Department of Labor are due 30 days after enactment.

Effective Date

These provisions are effective for premiums the first calendar month following the date of enactment.

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