Tuesday, February 24, 2009

UPDATE: Stimulus Bill Expands COBRA Coverage

The following article was written by Quatrini Rafferty partner, Vincent J. Quatrini, Jr., and will appear in the forthcoming Spring 2009 QR Newsletter


COBRA is the federal law that requires Employers to allow separated employees to purchase medical insurance through the company group plan for up to 18 months after separation, at 102% of what the company is paying for that insurance.

Up until now, that 102% was well beyond the financial reach of almost all displaced workers. The new stimulus law, pushed by President Obama, and signed by Congress,provides real financial relief to displaced workers who want to stay in the company plan.

With the stimulus package, the government agreed to pay 65% of COBRA premiums for people who receive pink slips between Sept. 1, 2008 and Dec. 31, 2009. The subsidy is limited to nine months and available only to those without another source of group health insurance.

Individuals who lost jobs after Sept. 1, 2008, but who did not sign up for COBRA at that time will get a second chance to do so. Employers must send these former workers a notice by mid-April. These workers have 60 days after receipt of the notice to pay into the plan.

Eligibility does not depend on income. But individuals with income over $124,000 will have to pay tax on the subsidized amount.

The subsidy money will not come to you directly. It will be sent to your employer in the form of an offset against payroll tax liability. You send in your payment of 35 % of the premium to your former employer and the government will credit the remaining 65% of the premium against your former employer's payroll tax.

For most people, the subsidies will start March 1. If you are already in the COBRA plan with your former employer, you will not receive reimbursement for any COBRA payments you made between Sept. 1 and March 1.

These are just the highlights. Many details still have to be worked out. Quatrini Rafferty suggests that if you do not hear from your former employer in the next 45 days that you contact your employer and find out who is administering their COBRA benefits. If that doesn't work, try the Employee Benefits Security Administration, a unit of the U.S. Department of Labor, at 866 - 444 - 3272.