Update Dec. 21, 2009: President signs bill including COBRA subsidy extension
In February, President Barack Obama enacted the American Recovery and Reinvestment Act (ARRA). Among other things, the ARRA provided a temporary (up to nine months), 65 percent, federally funded, COBRA premium subsidy to any qualified beneficiary who became or becomes eligible for COBRA continuation coverage due to an employee’s “involuntary” termination of employment occurring between September 1, 2008, and December 31,2009.
The subsidy is ultimately funded by the federal government. However, the mechanics by which the qualified beneficiary actually realizes the subsidy significantly affect employer/plan sponsors. Under the ARRA, employer/plan sponsors “cover” the government’s 65 percent subsidy at the time the premium is paid by the qualified beneficiary (who must pay only 35 percent of the applicable premium). The employer/plan sponsor then recoups the 65 percent subsidy from the government through payroll tax credits. COBRA notices also had to be changed — forcing employer/plan sponsors to incur additional administrative costs.
The subsidy is expected to expire for events occurring on or after January 1, 2010. But recent congressional activity regarding health care reform, and the push to ensure that the uninsured obtain insurance, begs the question — will Congress extend the subsidy into 2010? 2011?
Congress must extend the deadline, yet none of the proposed health care reform bills proffered by the various congressional committees includes an extension of the subsidy. This seems to suggest that it will not be extended. Nevertheless, the buzz around Capitol Hill suggests that it may be extended. Extending the COBRA subsidy would be more consistent with the tenor of the health care reform bills and the previous actions of the Obama administration.
So what’s an employer to do? I am betting on an extension of the COBRA subsidy and am advising clients to prepare for it. Thus, any budget should account for the additional costs incurred to administer the subsidy.
Ashley Gillihan is counsel in the Atlanta office of law firm Alston + Bird and is a member of the firm’s Employee Benefits & Executive Compensation and ERISA Litigation Groups. Mr. Gillihan focuses his practice exclusively on health and welfare employee benefit compliance and litigation issues for employers, health plan administrators and other health and welfare benefit plan service providers. He also has extensive experience assisting financial institutions and insurance companies who serve as Health Savings Account trustees or custodians.
Mr. Gillihan is active in publishing and speaking on various health and welfare benefit plan related topics including the following audio conferences
New COBRA Guidance for Employers: Clarifying the Complicated Subsidy
How 2009 Will Change Your Health and Welfare Benefits Plans
New HIPAA Rules Effective September 23: Data Breach Notification Requirements for Plan Providers
Is Your Health Plan Ready for Jan. 1? Mental Health Parity and Other New Benefits Rules
Also, you can keep up with the latest legal changes affecting employer benefits and trends in employee benefits with the Benefits Complete Compliance
We definately need the COBRA subsidy!!! In January, 2020, my COBRA payments will go to $850.00 per month. At that point, I will have to drop my insurance in order to pay rent and eat for a while. I am 58 years old, under doctors care, and lost my job after 37 years with the same company due to being outsourced to a company who is laying employees off at an alarming rate.
Just as urgently needed is a extension of COBRA continuation. 18 months would be plenty of time to find work with health coverage in a normal economy but it’s ugly out there right now.
We’re in our 40s and in basically good but not perfect health and we’re pretty suer that we’d get turned down for a private individual plan. In the past I was turned down for a Kaiser plan due to reporting acid reflux, a very minor health issue if it is being treated. I was floored. Clearly insurance will turn you down for very minor, common health problems.
We’re really frightened because once COBRA runs out, individual plans – already expensive – will probably turn us down and the HIPAA guaranteed-issue plans have minimal coverage and the prices are exhorbitant, at least $1100 a month for a couple. Not even our COBRA payments without subsidy are that high.
As scary as things are for us, we’re some of the luckier ones to even have COBRA and be getting a temporary subsidy. I don’t know what people do who didn’t qualify for COBRA or couldn’t afford the payments.
I wish we could just have basic universal coverage with a single payer for everyone, like Medicare For All, and the ability to buy private supplementary insurance. This country’s health care system is the pits.
Our insurance (2) people will go back to $1,208.05 a month, if this isn’t passed. My husband lost his job and we are Cobra insured, we have had to pay this amount for several months, before the bill was passed. It is more than difficult to make the payment, but we cannot get insurance anywhere else because my husband has a spinal cord injury and his condition will worsen. I am praying for an extension, and God willing – we will get it. Of course, that isn’t a long term fix for us – we need our insurance, I have breast cancer, and between my husband and myself – we have to have insurance, even if we can’t pay our other bills. 🙁
Is it my understanding that since I have been on COBRA and it will end in 2 months (from my original 18 months) that based on act ARRA, I can extend for 8 months? Also, since I have always had insurance and just suffered a stroke 6 months ago, I can not be denied for pre existing since I was constantly covered. Had I not had insurance and searching now, then my stroke would be considered pre existing. Is this true?
Is the COBRA government subsidy going to be extended past May 31 2010? I will be losing my Job on June 30. Of course, I cannot afford to pay 1700 a month for my plan