Stimulus package changes COBRA

The financial worries that accompany the loss of a job during a recession are many.

Stretching unemployment compensation to continue putting food on the table while making payments on a mortgage or rent, an auto loan, utilities, insurance and credit card bills can be a challenge, if not impossible.

But human resource managers at companies that laid off employees since last fall have been able to offer a little some good news on health insurance coverage.

Employers will now be required to pay 65 percent of the cost of a former employee’s health insurance premium if the former employee wants to continue health care coverage through the employer. The federal government will reimburse the employer through a credit in payroll taxes.

Previously if a former employee elected to continue health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986, commonly known as COBRA, the employee had to bear the entire cost of premiums. On average, employers cover about 80 percent of the cost of health care premiums for full-time employees.

The COBRA subsidy is part of the $787 billion economic stimulus package passed by Congress and signed into law Feb. 17 by President Barack Obama. The program includes selected tax cuts and incentives to spur certain consumer and business spending.

Some specifics for the subsidy are still being worked out, and it has conditions and limitations.

For example, it applies only to people who lost their job between Sept. 1, 2008 and Dec. 31, 2009, and who were enrolled in a group health care plan at a company with 20 or more employees.

The Sept. 1 cutoff leaves people like 29-year-old Debra Waszkiewicz, of Wilkes-Barre, out in the cold.

Waskiewicz, who lost her job last May, thinks the subsidy period should extend at least that far, when she believes the economy was souring.

Waszkiewicz said if eligible she would consider restarting COBRA coverage, which she dropped after three months because it was too expensive.

“It was $480 a month for just me and I couldn’t afford it.,” Waszkiewicz said.

Individuals and families can’t receive the subsidy if they’re eligible for other group health coverage, such as through a spouse’s health care plan or Medicare.

And there is an income limit of $145,000 per year for single individuals and $290,000 for taxpayers who are married and file their taxes jointly. Single people with an annual income between $125,000 and $145,000 and married taxpayers who file taxes jointly and have an income between $250,000 and $290,000 could qualify for a partial subsidy.

Also, while COBRA benefits are available for 18 months after a job loss, the 65-percent subsidy is being offered for only nine months.

People normally have 60 days after being laid off to enroll in COBRA, but the stimulus bill gives them a second chance; they can enroll within 60 days after being notified by their former employer of the 65-percent subsidy enrollment option.

LEARN MORE

Those who have lost their jobs since Sept. 1 and think they might qualify for the COBRA subsidy should contact their former employer’s human resources or benefits department. More information on federal COBRA requirements is available from the U.S. Department of Labor by calling 1-866-444-3272 or visiting www.dol.gov/cobra.

Individuals and families can’t receive the subsidy if they’re eligible for other group health coverage, such as through a spouse’s health care plan or Medicare.