Health Insurance Subsidy in the Stim: What you need to know

Details are surfacing on the federal subsidy of COBRA health insurance contained in the Economic Recovery and Reinvestment Act. The law aims to help laid-off workers by paying for 65 percent of COBRA premiums for up to nine months.

COBRA is the federal program that allows workers to hold on to their health insurance benefits after a job loss. The new subsidy is no more than a stop-gap measure on the way toward an envisioned universal health system. But it is a very big helping hand for anyone facing the immediate prospect of lost coverage.

COBRA coverage typically is available for 18 months but at a steep price: the former employee usually pays 100 percent of the premium plus a 2 percent administrative fee. The coverage is expensive but can be an especially important option for individuals who may not be able to obtain new coverage due to preexisting conditions. The coverage gap issues are especially acute for older workers who may have been forced into premature retirement due to the economic turmoil but are too young to obtain Medicare coverage (age 65).

The new federal subsidy will cover 65 percent of premiums for nine months. Other details also have surfaced on the subsidy; here are some of the key things you need to know:

-- Eligibility. The subsidy applies only to workers who lose their jobs between Sept. 1, 2008, and Dec. 31, 2009. This provision has generated quite a bit of frustration and angry comment from readers--and I can't blame them. This limitation appears to be a concession to business groups, which generally dislike expansion of COBRA. The argument seems to be that keeping older workers for longer periods raises the cost of insurance for the entire group. It also caps the overall cost of the program to the government, of course.

--Filing deadlines. Generally, you need to file for COBRA coverage within 60 days of leaving your job. But under the economic stimulus provision, if you lost your job in that time frame but didn't elect COBRA, you will have 60 days to make an election and get the subsidy after you receive notification from your old employer that you are again eligible.

--How it works. If you're eligible, you'll pay premiums equal to 35 percent of the total to your former employer's plan; the plan will receive the difference through reduced payroll taxes that they would have paid to the federal government, or through a refund under certain circumstances. The subsidy is limited to nine months of coverage.

-- Income caps. The subsidy is only available to individuals with adjusted gross income of less than $125,000, and $250,000 for married couples filing jointly.

--Small business and other exemptions. COBRA generally is not available to people laid off from very small companies, since the federal law exempts businesses with fewer than 20 employees from participating. It's also not available if your former employer never offered health insurance, terminates its plan or is liquidated.

What if you're not eligible?

You may be eligible for another type of COBRA subsidy available to workers who have lost their jobs as a result of globalized trade. If none of the COBRA options work for you, consider these alternate paths to getting insured.

 

 

 

Follow Mark Miller on Twitter: www.twitter.com/RetireRevised

Comments

[ReformCobraNow]

09:59 PM on 02/27/2009

Millions of Americans who lost their jobs prior to September 1, 2008 could not afford Cobra. Millions more elected Cobra but have now depleted their resources and can not continue on. Still millions more with pre-existing conditions who rely on cobra to bridge the 18 month gap between their former employers insurance and their state's high risk insurance pools are struggling to pay their premiums every month to prevent being locked out of insurance permanently.

Please join us in asking Congress and the Obama administration to eliminate the arbitrary September 1, 2008 cut-off date and 9 month limitation of assistance by signing our petition at http://www.ipetitions.com/petition/cobrareform and telling your friends about our efforts

[Lerrin]

11:33 AM on 02/25/2009

Many people have run out of unemployment benefits long ago, and affording COBRA was a delusional fantasy that none could afford.
They finally 'luck into' underemployment (and are lucky to get that)- where the wages are lower (by at least 50%), the hours are part-time (and often abruptly cancelled), and health care/retirement/paid time off are nonexistent.
They're invisible, because they no longer show up on any government radar - but they do still pay taxes, and paid a handsome amount of taxes when times were good.
How does the stimulus help these people?

And what EXACTLY DO you have to do to get on Medicaid?
I'm so tired of budgeting, saving, and then paying cash for my health care (when I DO finally have to break down and enter the health-care vortex), and I see people lined up with stairstep spawn, folks younger and older than me (but clearly new to the country), and they just whip out a card and it's clear sailing for them. I actually don't mind that they get care, but d*mn it, I've literally paid into this country for years, and my country is NOT paying me back- but it's taking care of them.

I've made positive contributions through former tax payments and current volunteering (at least 25 hrs /week), but wonder if you have to go off shore 500 feet, float in on an inner tube, and declare assylum - it seems you DO have access to care then.

[Citizen54]

11:32 AM on 02/24/2009

The author calls COBRA "a big helping hand." Really? Anyone who has tried to meet the high cost of COBRA payments knows what a cruel hoax this is, How many jobless people have $500 to $1300 available to give to a for-profit insurance company every month? Have you ever seen the size of an unemployment or severance check? Until insurance companies are out of the picture, the American worker will continue to be screwed. And these half-measures are nothing but a sop to the insurance companies. The only workers who benefit are the ones who have $ in the bank or a well-paid spouse who can cover the insurance costs.

[Mark Miller]

03:20 PM on 02/24/2009

Just to clarify: I wrote that the SUBSIDY of COBRA under the stimulus bill--covering 65 percent of the premium for nine months--is a big helping hand. No question, without the subsidy, COBRA is very expensive.

[undrgrndgirl]

01:54 AM on 02/24/2009

though you'd probably be better off losing everything - then you'd qualify for medicaid...

really, those other "options" are not options for most people who have lost their job (actually they are out of reach for most people who are working, because - contrary to popular belief - most people don't make $50,000/year)...i've looked into private insurance for myself - a recent college graduate, age 45, non-smoker, no dependents - $145.00/mo with a $25,000 deductible and NO drug coverage, $600/mo with a $2,500 deductible and some drug coverage (and other with ranges in between). can't really afford any of them.

this bowing to the insurance industry is disgusting - we need h.r. 676 passed and we need it now. it would help EVERYONE including business...

[brklynivn]

12:36 AM on 02/24/2009

Why not just let people buy into Medicaid. It is far superior to health insurance schemes, and people would be paying into a health system, not health insurance executive's $8,000,000 salaries.

[icemilkcoffee]

09:12 PM on 02/23/2009

This is plain and simple a giveaway to the HMO lobby. Why not just grant Medicare/Medicaid eligibility to those laid off workers? It would accomplish the same thing, probably for far less money- since there is minimal cost to the government unless the laid of workers actually require healthcare. Since laid off workers are a younger demographics than the usual Medicare demographics- the actual cost of their coverage would be fairly low. Whereas the COBRA subsidy will cost the government rain or shine even if the insured laid off workers never needed any of its services.