As reported in the Dallas Morning News, a little-noticed provision of the stimulus bill signed last month by President Barack Obama may give the growing ranks of unemployed workers some relief with their medical bills. COBRA is the federal law that gives laid-off employees the right to continue their health insurance for 18 months, but at their own expense. The article has so much helpful information that I’m going to quote most of it here:
Under the American Recovery and Reinvestment Act, those who were laid off since last fall may be eligible for a 65 percent subsidy to pay for COBRA, which allows people to extend employer-sponsored health insurance.
The Consolidated Omnibus Budget Reconciliation Act of 1985 continues health-insurance coverage from your former employer for 18 months. But it’s expensive – workers pay the full premium plus a 2 percent administrative fee.
With the administration’s new act, laid-off workers will now pay just 35 percent of COBRA premiums for nine of those months.
The administration is expecting a 300 percent increase in COBRA enrollees because of the change.
We’ve compiled answers to likely questions about COBRA from local tax and health benefits expert Sharon Alt, president of Fort Worth-based Alt Benefit Consultants; TriNet Group Inc., a San Francisco-based human resources outsourcing firm; and the federal government.
Who qualifies for the subsidized COBRA insurance?
Those who were involuntarily laid off after Sept. 1, 2008, and through Dec. 31, 2009.
In addition, people who were involuntary terminated between Sept. 1 and Feb. 16 who did not elect COBRA when it was first offered or who did elect COBRA but are no longer enrolled (for example, those who dropped COBRA coverage because they were unable to continue paying the premium) have a second opportunity to sign up.
Individuals eligible for the extended COBRA election period should receive a notice by April 18 informing them of this opportunity. They then have 60 days to elect COBRA.
Who is not eligible?
If you are eligible for Medicare or other group health coverage, such as through a new employer’s plan or a spouse’s plan, you are not eligible for the subsidized COBRA premiums.
How much can I save?
In 2008, the full annual cost of employer-sponsored health insurance averaged $4,704 for an individual policy and $12,680 for a family policy, according to health research firm Kaiser Family Foundation.
Under the subsidy, the cost of maintaining the average policy would be $377 per month for a family and $140 for an individual. Once the subsidy expires, that would rise to $1,078 per month for family coverage and $400 per month for individual coverage.
Are there income limits for the premium reduction?
If you earn more than $125,000 for the year (or $250,000 for married couples filing jointly), you may have to repay all or part of the premium reduction through an increase in your income-tax liability for the year. If you think that your income may exceed those amounts, you may wish to waive your right to the premium reduction.
Do you have to have health coverage before being laid off to qualify?
Yes. However, if you’ve had a baby or adopted a child since being laid off, they would be considered as qualified beneficiaries and be entitled to health benefits.
What if you had an accident or incurred a medical condition after you rejected COBRA insurance before the subsidy was available?
As long as you still meet the other previously mentioned qualifiers for COBRA, insurers must accept you, even with your pre-existing condition.
How do you sign up for COBRA and get the subsidized premium?
Your employer’s insurance plan should send you a notice of your eligibility to elect COBRA and to receive the premium reduction. The notice should include any forms necessary for enrollment. You may also want to contact your plan directly to ask about taking advantage of the premium reduction.
My health coverage was terminated when my employer shut down and laid off all its workers. Can I get the premium reduction to pay for new health coverage?
Generally, no. If there is no longer a health plan, there is often no COBRA coverage available.
What can I do if my former employer’s group health plan denies my application for the premium reduction?
If the plan determines that you are not eligible for the premium reduction, you can request an expedited review of the denial. The Department of Labor will handle appeals related to private-sector employer plans.
Can the plan’s benefits be changed to make COBRA more affordable?
Typically COBRA is based on the benefit selections you had before leaving your job. However, under the new rules, your former employer – but not the employee – is allowed to downgrade your plan. It cannot be upgraded.
What are some other health insurance options for laid-off workers?
If you’re married to a working spouse whose job offers health insurance, the most economical decision is to join his or her plan. Even if you are not currently under that policy, federal law says losing your job is just cause for special enrollment.
Another option is to see if you or your children qualify for any government programs.
Now that you’re not working, Medicaid may be an option.
Also, check to see if an association or club you belong to offers health insurance to its members.
Getting an individual plan on the private market is also an option. If you opt to buy a private policy, find a broker who can help you navigate options and confusing legalese.
Make sure the plan covers what you need, such as prescription drugs, out-of-network care or treatment for chronic conditions.
Also consider your out-of-pocket costs and co-payments. A higher deductible – the amount you need to pay before your insurer starts reimbursing you – will keep your monthly premium down.