Good news for those facing unemployment: COBRA Health Insurance Subsidies Continued!

Posted on January 5, 2010


Congress signed a defense spending bill into law on Dec. 19th; but this blog entry will only be concentrating on one small part of the bill with a huge impact; the continuation of subsidized COBRA benefits.

A federal law known as COBRA allows workers who leave their jobs to continue their former employer’s health insurance coverage for up to 18 months. Up until last year, workers had to pay the entire premium in most circumstances, making COBRA a challenging option for many unemployed workers.

In 2009, Congress enacted a stimulus package that subsidized 65% of COBRA premiums for unemployed workers for up to 9 months – which began in March. With unemployment still high in most states, Congress decided to extend and expand upon this benefit in 2010. Currently:

•Individuals who are eligible for the subsidy will be able to receive it for an additional six months, for a total of 15 months.

•Workers laid off between Sept. 1, 2008, and Feb. 28, 2010, are eligible for the subsidy. The original cutoff was Dec. 31, 2009.

The 2010 extension is retroactive, so unemployed workers who lost their subsidy before the legislation was enacted are still eligible for six more months of subsidized premiums. The government is providing a grace period for workers who let their coverage lapse and if this happened to you; you can resume subsidized COBRA. First, you must pay the back premiums at the reduced rate by Feb. 17, or 30 days after receiving a notice from your plan administrator, whichever is later.

For example, suppose your subsidy expired in October and you didn’t pay your COBRA bill for November. Your employer is required to notify you that you have the opportunity to restart COBRA for six months. As long as you pay the reduced premium for November, you won’t have a break in your coverage.

If you already paid the entire premium to continue COBRA after your subsidy ended, you may be able to get some of that money back. The Mayor’s Health Line advises that you contact your plan administrator or employer about receiving a credit toward future COBRA premiums or a refund. We have heard stories where employers have assisted in this process and clients were very grateful.

For those whose COBRA subsidy hasn’t expired, no action needs to be taken. Look out for a notice from your plan explaining the six-month extension, you will most likely receive one.

Who is NOT eligible for the subsidy?

The legislation extending the COBRA subsidy didn’t change the eligibility requirements for the benefit. You are NOT eligible for the subsidy if:

•You left your job voluntarily. The subsidy is limited to individuals laid off between Sept. 1, 2008, and Feb. 28, 2010. If you qualify, your family is also eligible for subsidized COBRA coverage.

•You have access to coverage through your spouse’s health insurance or Medicare.

•Your employer has gone out of business and is no longer providing group coverage.

•Your employer didn’t provide group coverage. In addition, the federal COBRA rule applies only to companies with at least 20 full-time employees.

Massachusetts, along with many other states, has a “mini COBRA” plan that cover small employers (2-19 employees), but it is administered a bit differently. The mini-COBRA plan is a state law, not federal, and is enforced by the Division of Insurance. It also does not apply to self-funded plans (which federal COBRA does).

For more information about the subsidy, or to find out how you can apply, you can call the Mayor’s Health Line at 617-534-5050 or 1-800-847-0710. The Federal government also has a dedicated information page.

So far, the subsidy has proved to be extremely helpful to unemployed workers facing hardships. After the subsidy was enacted, many more unemployed workers could employ COBRA benefits, and therefore chose to participate. According to a study by Hewitt Associates, many industries saw huge increases in participation, the largest being industrial manufacturing, which jumped from an average of 7% participation to 67%. According to the study, on average, each worker saved over $5,000 with the subsidy.

Posted in: Insurance, News