As a part of the economic stimulus plan (also called the ARRA - American Recovery and Reinvestment Act), any American laid off during the recession of 2008 - 2009 may qualify for federal assistance to pay for COBRA health insurance continuance. Here are some FAQs to help you understand the benefits, and to decide if you qualify for this assistance.
What is COBRA?
COBRA, the Consolidated Omnibus Budget Reconciliation Act, is a law that allows some people to continue getting health insurance once they no longer have a relationship with the employer who used to provide that insurance. You may want to read more information about general COBRA policies.
Why is COBRA So Expensive?
Under ordinary circumstances, COBRA continuation coverage seems very expensive because health insurance in general is very expensive. The premium for COBRA will be the total cost to the former employer, not just the amount you, the employee, used to pay. In addition, the employer may charge an extra 2% to the former employee to cover administrative costs like paperwork.
Learn more about how your COBRA premium is calculated.
What Is Different for COBRA in 2009?
If you were laid off (which the government calls "involuntary termination") between September 1, 2008 and December 31, 2009 then you may be able to get help paying for COBRA insurance continuation coverage. The federal government may help you reduce your premium by 65% for a period of up to 9 months.
What Kind of Insurance Will I Get?
Under COBRA regulations, you'll have the same coverage, using the same plan you had while you were still employed. Some employers have an option of offering you additional coverage plans. Check with your former employer's HR department to see if you have a choice of plans.
You will also continue using your insurance plan just the way you used it before you were laid off.
Who Is Eligible for the Premium Subsidy?
You are eligible for the 2009 COBRA premium subsidy if:
- You were laid off between September 1, 2008 and December 31, 2009.
- You choose COBRA continuation coverage. (If you decided against using COBRA when you were first laid off, you may be able to change your mind and re-elect coverage. Check these guidelines.)
- You are not eligible for another group plan. Another group plan could include coverage your spouse can get through his or her employer, coverage you may get when you get a new job, individual coverage you elect apart from your former employer, or if you become eligible for Medicare.)
- Your COBRA coverage has not ended for some other reason.
You can learn more about eligibility at the ARRA 2009 Cobra Premium Reduction website.
How Can I Apply for the COBRA Subsidy?
Your employer is required to provide you with the information you need to apply for the subsidy on your last day of employment. If you were laid off before the ARRA COBRA subsidy went into effect, then your employer should have provided information to you as soon as it became available.
If you have not received the forms and information you need, get in touch with your former employer's HR department.
Will the Government Send Me Subsidy Checks?
No. Your COBRA premium will be billed at 35% of what you would have paid throughout the time you are eligible, up to nine months. In effect, you will pay 35% of the 102% total for the cost of your premium.
The subsidy will be paid on your behalf either directly to your former employer, or to the insurance plan administrator.
Will I Be Reimbursed for the COBRA Coverage I Paid For Before February 2009?
No. The subsidy did not kick in until February 17, 2009, so any COBRA premiums that needed to be paid before then had to be paid in their full amount.
If you paid the full amount after February 17, 2009, then you should contact your former employer's HR department and ask them to arrange for a credit against future premiums.
Are There Any Downsides to Accepting the COBRA Subsidy?
The subsidy may be more expensive for you than an individual plan if your annual income is more than $125,00 per year (individual) or $250,000 (married, joint.) Since tax rates are higher at those levels, the subsidy may be less than the available tax credits.
The IRS has information specific to ARRA which can help you decide.
Where Can I Learn More About the 2009 COBRA Subsidy Program?
The US Department of Labor maintains a website with the latest information about the 2009 COBRA subsidy program.
Your employer or your insurance plan's administrator may also have information that will be helpful to you.
