More on the COBRA Premium Subsidy in the ARRA.
Just to follow up on yesterday's post about the American Recovery and Reinvestment Act of 2009 (the ARRA - I just invented that acronym, give me credit) that generated some good comments. Yesterday's post concerned provisions in the Act (Title III, Subtitle A, Section 3001) that provides a subsidy for COBRA premiums.
First, and most importantly, if you or a spouse or a parent has become COBRA eligible in the relevant period (September 1, 2008 to December 31, 2009) and has not elected to purchase COBRA coverage, the Act provides a special new election period that you need to be aware of. Starting on February 17, 2009, the involuntarily unemployed person has sixty days from renewed notice to apply for a continuation of coverage.
The subsidy is 65% of the premium. It is paid by the employer or the plan. The employer or plan receives a payroll tax credit. Rules on how that will work must be issued by the Secretary of the Treasury in the next 30 days.
For example, you are laid off in September 2008. Your family coverage health insurance premium is $1,000 per month to continue health care coverage. Under the subsidy the employer or plan pays $650, and it costs you $350 to continue the coverage. The employer or plan gets a tax credit of $650. If the credit exceeds tax liability, then the employer gets a refund of the amount. The laid off employee does not get a cash subsidy. The subsidy applies to premiums paid after February 17, 2009 - there is no provision for a "refund" of prior premium payments.
Finally, the subsidy applies to involuntary unemployment. Although this may be clarified, it does not appear to cover "voluntary" qualifying events: divorce, retirement, or Medicare eligibility.
Comments
Apparently I qualify for the Cobra subsidy-how do I go about applying for this. I haven’t found any information that states how to get signed up. My ex-employer pays nothing and I pay the entire Cobra cost.
My previous employer also pays none of my Cobra premium and when I spoke to him about it today, he assured me it was NOT his responsibility to come up with the 65%. How will information on employer coverage be distributed? Will I have any recourse if he refuses to comply?
My situation is a bit different. I was laid off in July 2008. I had 6 months of paid insurance, then I could choose to go into COBRA or to go into what they call the retirement plan group coverage, which insures me until 65. The cost is the same as COBRA. I originally signed up for the retirement group. Now that my 6 months are over and still no job, I cannot afford either plan. Do you think I would qualify in some way?
I was laid off in January 2009. I elected to try paying for COBRA as I can’t otherwise obtain insurance due to a prior condition. I won’t be able to continue for long if I remain unemployed. Am I correct that I’m out of luck and that no assistance is provided for those who became unemployed after December 31, 2008?
Again, thanks for the comments.
Please keep in mind that the implementation was February 17, 2009. So, the dearth of information is because not many people have looked at this in depth and there are many questions. Stay tuned.
Joyce, I do not know. Your situation is not unusual. Some states have continuing coverage, some plans have some provisions and yours include retirement group planning. It is simply not clear how these plans and the subsidy will work. Wait and see how the Treasury Secretary implements the Plan.
Laurie and Jennifer, what will happen is the employers and plans will be given direction how to implement the subsidy. They will send out notice to you and you can opt to take the coverage. The employer or plan will pay the 65% and receive it back as a tax credit. The plan or employer must notify you and send forms (not created yet) on how to apply. The employer or plan will comply or the health care insurance plan will be made ineligible as a deductible plan under IRS rules.
Steve,
No. The eligibility period is September 2008 to December 2009. I think you misread the post to be December 2008. Actually, you stand to benefit the most – you should see an immediate benefit starting in your February 2009 premium and going forward for at least nine months.
I know they have to draw a line, but some of us have a worse advantage due to being unemployed longer, ie July vs Sept., and therefore it feels as if we are penalized more because of being unemployed longer. Looking back, do you think there were any more jobs available then or a couple months later, when huge layoffs have been happening ever since? Where would you get a job with all the competiton? However, back to the insurance, “wait and see” may be too late. I have only about a week to make the decision to pay the premium for the retiree group (although I am not retired, only in it due to age). I have already been granted the grace period. Another thought, in a situation like this, if I were to get a subsidy for a period of time, it makes more sense to carry the one that I could potentially qualify for for longer, vs the COBRA that has the limited time, given the cost is same. That doesn’t seem logical for a choice either.
Apparently, what I do know is that I will join those without insurance. It would have been nice to had it for a bit longer as health is nothing we can count on.
Here is another perspective people:
Businesses owner who, because of the economic downturn, had to layoff 10 people on Sept 1 of 2008. This business, already facing a cash flow crunch, is now on the hook to cash flow 65% of those cobra payments until the tax credit takes effect next year. Small business now out of business with the rest of its 45 employees.
Thanks Obama, I hope you all enjoy your “free” healthcare!
This is unconstitutional. Please write your rep in Washington. Maybe the government should just hand out visa cards. After I get done paying my cobra since June 08., and paying the newly unemployed’s cobra I will finally qualify for food stamps etc. Of douse my home will foreclose and bring down the neighborhood because since I obtained a smart loan, and have made payments on time… No help there either.
Thanks Washington! Reward for the hard working and sensible consumer …. Pay for everything. Change??????
“than the employer gets a refund of the amount. The laid off employee does not get a cash subsidy.”
Sorry, but I won’t give you credit for improper word usage – I think you meant to say “then” not “than”.
You do have more information than other sites, and have answered my all important question, which is, “how do I get this $$$?”
Thanks.
Kathy,
I have corrected my word usage. In my zeal to bring forth relevant information, my staff (me) failed to correct the error.
Can anyone answer the question: HOW do you actually get the 65% refund or credit? Do you apply? Does Cobra send you a check for the past payments, and then just reduce the premium automatically? I can’t find the answer to these questions anywhere! I am aware of the qualifications……..How do we get it?
Here’s my situation. Laid off in late 11/08. Offered COBRA, declined due to cost. With the subsidy I would elect coverage. However, my employer only has 15 employees. Does the size of the company change anything? Will I be offered the subsidy?
Does a qualifying event include having a disability that resulted in involuntary termination?
I was not for the stimulus package, but now that it has passed I’m glad to see this benefit from it. I was laid off after working at a company for 32 years. I will take anything I can since I have been unable to find full time employment. The insurance we can afford it quite inferior to what I had when employed.
Thank you for the information regarding this program.
I have already made March cobra payment, to much info,. not available at this time. You really think smaller companies are going to comply? I had to push just to get the original cobra package. The company is not all that small, however, they still seam a little behind. How will this come about land when
The owner of my company informed my store that we would be laid off,(store Closing) he brought up the new cobra plan but made a ponit to say it was for only one person, I am a single mother and I insure my family, I hope he was mistaken any one know?
Hi Greg, Thanks for the fantastic explanation on how the New changes in Cobra will be implemented. I had one question here?
For example those who already been terminated(laid off) say last year Sept 1st onwards would HAVE been paying the employee contribution till now 100% .So with the new rule 65% will be paid by the employer.In this case will the employee get a refund of the amount say 35% back that he/she has paid from Septmber 1st,2008?
Your old employer is supposed to pay the 65% and the government will reimburse them.
I am the former president of A.E. Roberts Company, a national training and consulting firm that has held hundreds of COBRA seminars. I am holding a number of webinars on the new COBRA subsidy. For more information go to http://www.wjflynnandassociates.com.
Bob Radecki
Again, thanks for the comments.
I urge you to read both blog posts and the link to my article “What is COBRA?” Many questions asked here are answered in those documents.
A number of you have suggested that employers will not comply. It is true that small to mid-cap employers frequently have compliance issues. This is true with every “new” plan…going back 80 years to social security withholding. The DOL has compliance assistance on its website.
Finally, although it is addressed in the posts, let me reiterate: You do not get a check. You do not need to go now and apply anywhere. Within thirty days after February 17, 2009, the Secretary of the Treasury will create an approved notification letter. Plans and employers will mail that notification to those who are eligible. The subsidy of 65% of the premium is paid by the employer and refunded to the employer as a credit against payroll taxes. Technically, the employer pays nothing it is a wash.
What about the 2% administration fee that employers are allowed to charge us, in addition to the premium costs? Will we now pay 35% + 2%, did the 2% rule get dropped, or do we pay 35% of the 102%. My employer hasn’t sent anything yet, but I want to figure out my new costs.
My husband was laid off in January 2009. His company agreed to continue to pay their share of 4 months of his medical premiums as part of his separation agreement. (February 1 through May 31, 2009). The company pays around 80% of the premiums – more than the 65% that the ARRA covers. Therefore, we would like to continue on the separation agreement terms and start the ARRA terms on June 1, 2009. How can we do this?
What about an employee who had their hours reduced, so they no longer qualified for benefits? Then the employee quit two months later.
Do they qualify because of the reduction in hours or because they quit they don’t qualify?
Greg…it is certainly not a “wash” as you say. First, the business will be out the cash for a considerable amount of time. Plus, for those of us using a credit line to fund our businesses, that money has a cost. Even if we recoup the exact COBRA subsidy cost with a tax credit, I’m sure ARRA will never reimburse the cost of capital.
The biggest danger is this stupid law is the adverse selection that comes from going back in time to make health care decisions. Who among us would ever purchase any kind of insurance if you could go back in time to decide? You’d simply wait until something bad happened and then “buy” it.
This law is pure bulls*#t and will hurt many businesses. That’s what we get for electing a socialist.
My health insurance was paid thru 2/28 by my former employer at the time I was laid off. I knew I couldn’t afford the Cobra premiums so I’ve been looking at a less expensive indivudual plan with less benefits. IF my former employer is going to pay 65% and then be reimbursed with a tax credit, it would make sense for me to take action now while I still have 2 days left to exercise my choice to go with the Cobra. Any advice? I need it quick!
Chris:
Thank you for your comments.
I am a small business person and I can see your frustration.
Greg, if you were terminated and already elect Cobra, what will happen? Will you receive back pay or will the new rate start after you apply?
I was laid off on Feb. 20 with benefits ending on that day. I have already inquired about Cobra due to the fact that my daughter is post opp and was just released from a 10 day stay in the hospital. I was told that I have to pay almost $500 for the last remaining 8 days of Feb. and that the new plan would not go in to effect until March 1…is this correct or would those 8 days fall under the 35% plan since it was after Feb. 17?
If you need information about the COBRA changes, you should read up first then ask questions later. Many of these questions are explained if you would read about the changes.
The DOL has not released much information for employers yet, they have until 3/17/09 to do so. Many employers are gathering information before they send anything out to eligible beneficiaries.
The subsidy will apply to premiums paid for March 09 payments, if your employer used beginning of months/end of months as effective dates, and not in the middle of the month.
Please read the information available online, and be assured your employer is working on getting information out to you.
http://www.dol.gov/ebsa/cobra.html
http://www.elinfonet.com/
My husband was laid off and I was under his insurance, we are covered till the end of March. My company provides health insurance but it will cost more then the Cobra plan. Can we still go on Cobra?
For those of you who are commenting that the employer will be “out the cash” for a period of time” I don’t believe that is the case. Although the IRS regulations probably haven’t been written yet, the employer gets a credit off of the quarterly payroll taxes. Since payroll taxes are due shortly after each pay (usually weekly), the employer can just reduce the deposit by the amount of COBRA subsidy credit.
My husband lost his job February 2008 at the start of the housing crisis. We elected COBRA and have been paying out of pocket since March 2008. It appears we WILL NOT qualify for any funidng from the stimulas package….correct? We have another 6 months to pay out of pocket and then will have to give up coverage. What next?
My last week of work was Aug.28,2008. I was paid two weeks severance. The company paid my insurance thru Sept. so I was eligible for COBRA in Oct. 2008. Will I qualify under the stimulus package?
Jocelyn,
See the link for the (probable) answer to your question.
http://www.naifa.org/advocacy/govwatch/20090220_arraCobra.cfm
My brother has a maybe not unique situation.
He’s a construction trace union member and his
insurance is based on number of hours worked.
Since he didn’t work enough hours in 2008,
his coverage ended Dec 31, 2008.
He’s still a union member, but can’t work
due to hip replacement Dec 15 (just under the wire). Is he technically laid off? would he apply? In the meantime, family members are
helping him with COBRA premiums.
Can anyone answer Steve’s question? I left my job in February due to disability. Does anyone know if I am “assistance eligible”?
My husband divorced me in September 2008. It was not my choice. I was “employed” as his wife and did not have an outside the home job. Do I qualify for COBRA under the Stimulus Package relief definition? My insurance with his employer ended February 28, 2009. Thanks
I worked for a large company that went bankrupt and closed. I was told because the company went bankrupt I was not eligble for Cobra. I had to purchase purchase very expensive health insurance on my own. Since I did not “volentarily leave” I was wondering if I could participate in this stimulus help.
So many great questions here…thanks all! Paul, unfortunately if a company goes under (bankrupt) there is no COBRA entity available to former employees (since there is no company left to administer COBRA), and ee’s will not be able to take advantage of the stimulus plan. CJ, you will NOT be eligible for the COBRA premium since your husband’s layoff occurred before 9-1-08. Anyone who was laid off 9-1-08 or after, whether they elected COBRA at that time or not, will have the opportunity to pay COBRA premiums at 35% of the COBRA PREMIUM RATE (that’s 35% of the 102% that is usually charged for monthly COBRA premiums). Example: If your monthly insurance costs $385 per month, then your normal COBRA rate would be $392.70 ($385 x 102%). The COBRA premium rate at 35% would be $137.45 ($392.70 x 35%). This rate is good ONLY for up to nine (9) months, then you would either revert back to the 102% rate, or cancel your COBRA coverage. IF you have already been on COBRA, you can only use the COBRA Premium pricing during the remaining months you have left (COBRA coversage will not extend past the normal 18 months, unless there is another qualifying event). This stimulus plan starts effective 2-17-09, the date Obama signed the law. There is no waiting for convenience sake. The deadline to apply is very exact and coverage starts March 1, 2009.
Does it mattered if I was ” let go” not “laid off”? I have already emailed my ex-employer to see about getting this. She has not responded. Here is the other part, I am now temping for one month for a company I hope will hire me but if they do not then I am back to unemployment.
I need to know if I can get this because I could get inferior insurance through the temp agency.
Does that disqualify me?
OY!
Can my son covered as a dependant on my policy claim the stimulus help if I voluntarily quit since he did not have a choice?
I have been unemployed since November 2008. I have now paid COBRA premiums for March and April. My previous emplyer is a large New York fashion corporation, yet I still have not received they continue to say “will either arrive from “the company” or ADP shortly as they are still working out the details”.
How long can they drag this out? Will they be required to reimburse 65% to their ex-employees for March and April premiums?
As a small business cobra administrator, I can tell you that just as the laid off employee hasn’t been receiving information quickly, the information getting to us as administrators is just as slow. The DOL finally issued updated cobra notifications for employers to send all employees who qualify as an assistance eligible participant. Your former employer has until April 18, 2009 to get the information out to you. Your are required to make your Mar and April full payments, and you will be reimbursed. If you think about it (depending on the amount of your monthly premiums) for full premium payments for Mar and Apr…you may not have to make another payment until July or August! If you want to blow steam at someone, you should blow such at our legislation for passing this subsidy on such short notice and not your former employer.
I was laid off in February and offered Cobra coverage, however it was going to cost me $900
+/month for my self and children. Before ARRA I wouldn’t have been able to afford it, with it I can. However,if the worst happens and I am still unemployed in 9 months, I would no longer be able to afford it. What would be my options? If I dropped my children from coverage at that point I may be able to still afford the coverage. However, would my children be able to enroll in my ex-spouses plan at that time. We have not considered using my ex-spouses plan before as my plan is superior and cheaper.
I was also laid off/let go (you pick) in 2008. My last official day of work was February 15, however, I was given a severance package that ended within the eligibility period. My COBRA was to start effective December 1, 2008. Am I eligible? I can not find any specifics related to situations like this although I see lots of similar questions.
i have been off of work with disability since feb.21, of 08. my short term disability ended in august og 08. my termination daye was aug 4th of 08. i had a 90 day seperation period where i could return and still have my same rate of pay and my senority.that would have been nov. of 08. what i want to know is do i qualify for the reduced payment in cobra. i had to start paying cobra insurance on sept 1st of 08. my job said that i didn’t qualify because my termination date was aug. 1st of 08. is this true even though they didn’t know for sure if i was coming back until my seperation period of 90 days was over which was nov. of 08. was i still considered an employee until that seperation day was up?
Greg-
Is there a cap to the coverage-ie if you made over $150,000 then the company which laid you off is not responsible to subsidize? My husband was laid off in Jan 2009-but he received his quarterly payment from 2008 in 2009 and with his 2009 salary unused vacation time etc he may be over $150,000. Help!
Greg, thanks for the intial information – it is hard to come by anything concrete on this topic. Per your earlier posts/articles “…You do not get a check. You do not need to go now and apply anywhere. Within thirty days after February 17, 2009, the Secretary of the Treasury will create an approved notification letter. Plans and employers will mail that notification to those who are eligible.”
1) We are now 60 days past 2/17/09 and I’ve seen no notices or further information. What is the status?
2) You state COBRA recipients will not get a check, which I understand for future payments, but what about reimbursement of prior payments (Sept 08 & on) for those of us who’ve been paying 100% of our premiums?
Thanks very much
As I was laid off last September, this act is going to provide some much needed assistance for me. I am glad that our President and his cabinet worked to provide this for Americans. It is the process with which the administrators and their outsourced companies (for example, ADP) are handling this that I am frustrated. The information they are giving is indirect. There is conflicting information on their website and from what they’ve sent to me. They waited to send me mail until the very last date possible, April 18th, today. One letter says to pay 35% of my premium and that’s how they’ll know I’m eligible, then they have an opt-in form on their website. The information sent to me is for someone who didn’t elect COBRA or elected it then discontinued it. Neither apply to me. They have handled this poorly in order to find loopholes so they would not have to be responsible for this act. I am terribly disappointed in how this is being handled.
I was hit by a car and broke my hip September 2008. Had to stop working and start COBRA coverage. Would I qualify for the reduced coverage?
Hello, if you were laid off as of sept 1,2009 and your employer has more then 20 employees then he has to send you a notice of your coba rights. If you did not receive them, call 800-238-0876.
As the employer/ Benefits Adm Asst I sent out the Alternative notices to all terminated employees / spouses & dependents who had different addresses, regardless of qualifying event – who had health coverage when employeed (about 185 ppl). My supervisor came back from vacation and basically stated that I did not handle the task correctly, she stated that I was only to send out the notices to involuntary terminations. I disagree and thought I did the right thing? But did I?? my understanding was that all who had a qualifying event needed to be notified of this new law, voluntary term, involuntary term, on cobra, off cobra & never on cobra and at the point in which they apply for the Assistance for Reduction in premium we the employer/plan/insurer.. determine if they are eligible or they are denied. In the event they are denied they are able to file a grievance at that point with the dept. of labor. Did I get it right? or was I way off? I need peace of mind!
I am paying 100% of my COBRA insurance and was laid off in January. My former employer has not sent me an application and I hear that the sooner you get your application in the sooner you get the subsidy. What do I do if my employer doesn’t send me an application? Any helpful information would be greatly appreciated…
I was forced to resign as our hours were cut back and I could no longer afford to buy groceries, medicine, doctors, etc., – but still made just enough not to qualify for food stamps or any other assistance. Would I qualify for the 65% reduction?
OK, here’s one I am kinda surprised hasn’t come up. I was laid of 1/16/09. My company offered to continue to pay the share of my COBRA premiums that they were paying while I worked. Now my wife’s group plan had a 30 day window for me to join. AT the time, not knowing about the ARRA and my company paying most of my premium, I did what anyone would have done and kept my COBRA. Since the ARRA did not take affect until AFTER my 30 day window, am I elligible for the subsidy? And really, why is one inelligible if they can get on a spouse’s group plan. The cost to do that is nearly if exactly the same. If I can’t afford a full COBRA payment, how can I afford the cost of my wife’s group plan?
I did not see an answer to Kathy’s question but I have the same type of problem. I was put on disability and exhausted my FMLA. The employer granted an additional 90 day Leave without Pay but has moved me to COBRA giving the reason as “Reduction in Hours.” My employer only has two option for COBRA that one and some form of termination. Is this legal? I am, also, considered a Key employee. Is this not a form of avoiding the laws and not paying?
My husband fell off a roof at our home in Nov. 2008 and suffered a stroke because of the injury he suffered. He has since been deemed disabled and will no longer be able to work. He was covered under company insurance until the end of this month (May 2009) and then hehas the option to go on Cobra which we cannot afford unless he qualifies for the 65/35 Cobra stimulus package. Under the plan, would he qualify to theses lesser premiums under the government stimulus plan? Your response is appreciated.
Kay Adam
I had made out of pocket COBRA payments from Jan 2009 till April 2009 without any assistance from the employer.
Since the stimulus was effective 2/17/09, should I expect a reimbursement based on the revised rates from the plan administrator?
I was laid off in Virginia just prior to Thanksgiving in November 2008. I did Cobra my insurance and at the time of the stimulus, had prepaid for February and March. I did not get notified of the stimulus assistance from my previous employer until mid to late March and did take advantage of the reduction for April and May. I have since gone back to work at another emplyoyer and changed insurance. My question is, am I entitled to any rebate from my full February and March payments? If I were a gambling man, I would bet all that I have that my previous employer did not do me right by it. Please comment.
Thanks,
Guy
i was laid off permanent May 12 2009 and my insurance stopped June 1 2009 and as of yet i havent received anything about cobra. Ive heard many things that if you go so loong without coverage your next job thats offers insurance they could list you as preexisting.What can i do?
I read through some of these comments. There is lots of information available on the Internet to answer your questions. Please don’t get all upset until you know the facts. I agree that the taxpayers overall, will be hurt by this, but individual businesses will not, (other than the time to comply.) The requirement to qualify for the subsidy has several dates. Here are most of them:
Involuntary Termination after August 31, 2008 and before January 1, 2010.
Periods of Coverage that begin after Feb 16, 2009. (That would usually be March 1, 2009). Last for up to 9 months only.
That should answer most of the questions posed here.
WOW. After reading some more of these comments there is sure a lot of INCORRECT information being passed out. The subsidy does not go retro-active before February 16. If your plan requires you to pay on the 1st of the month, it would be your March 1 payment that would be the first to be reduced (if all other qualifications are met.)
If my final day of employment was August 29, 2008 and I had 68.5 hours of Employee Paid Time Off will that extend my effective termination date to September for the purpose of qualifying for the COBRA Premium Subsidy? I did pick up my former Employer COBRA and still carry it. How do I now apply for this subsidy and how long will I be eligible for it?
I lost my job in October 30, 2008. I had Cobra for November and December ($1008.00 a month), and then dropped it due to the expense.
When I heard of the ARRA, I contacted my former HR administrator and told her I wanted to sign back up. She admitted to being over her head and was unable to figure all the details of the program out.
This led to my family not being back on the Cobra Insurance until May 15th, 2009. My question is this, as the HR administrator could not figure out how to handle the ARRA Cobra package and I did not have coverage until May 15th 2009, is it legal or part of the ARRA Package details that I must be retroactively charged for my portion of the Cobra charges back to March 1st. The date the government plan went into effect?
I had no coverage, but she is making me make up these past months payments. She offered to “try and file” any potential claims, we were just lucky and no one got sick. And we had already pulled ourselves off expensive medications.
Again my questions, is it law that I have to pay for these months since she didn’t understand the rules to the program at the time?
Thanks for any assistance.
Big question! I was working for an awesome employer for four years. Business went south and he had to cut our pay….so I found another job to make the money I needed to (elected COBRA through him)….I pay 100%. Not even 3 months later, I am now laid off due to going out of business with the new company. Am I eligible for the subsidy now or no? HELP!