Under the Stimulus Act that President Obama signed into law on February 17, 2009, eligible unemployed workers are entitled to a COBRA subsidy to help them pay for extending employer-provided group health insurance benefits.
Stimulus Act is a nickname for the American Recovery and Reinvestment Act of 2009 (ARRA). Generally, the Act is referred to as the economic stimulus plan or package, economic stimulus law, economic stimulus bill, or simply as the stimulus.
Under an older federal law, referred to as the Consolidated Omnibus Budget Reconciliation Act of 1985 or COBRA, eligible workers who lose their jobs have the right to continue their employer-provided group health insurance benefits for up to 18 or 36 months.
The problem is, unemployed workers often must pay up to 100 percent of the premiums, plus up to a 2 percent administration fee, out of their own pockets. With monthly premiums for COBRA extended health insurance benefits averaging over $400 for individuals and more than $1,000 for families, many unemployed workers simply can’t afford to extend coverage.
The Stimulus Act at least partially fixes COBRA affordability, by providing a 65 percent government subsidy to help eligible unemployed workers (and eligible dependants) pay their premiums for up to nine months. (See Update below.) Beginning on or after February 17, 2009, eligible workers will pay 35 percent of their premiums, while employers will pay the remaining 65 percent. Employers will be reimbursed through a tax credit.
To become eligible for the stimulus COBRA subsidy, among other requirements, workers must have been involuntarily terminated between September 1, 2008 and December 31, 2009.
Update: President Obama has authorized a second COBRA subsidy extension, which extends the eligibility deadline to March 31, 2010. See the blog post COBRA Subsidy Extension for more information.
Workers who were involuntarily terminated between September 1, 2008 and the day before the ARRA enactment date on February 17, 2009, but didn’t elect or cancelled COBRA coverage because it was unaffordable, will have an additional 60 days to elect coverage and receive the stimulus COBRA subsidy.
Exactly what constitutes involuntarily termination (other than the obvious mass layoff) is not yet clear, because the new COBRA rules are still evolving. But, as the rules stand now, employers must notify qualified unemployed workers of their 60-day extended eligibility for the stimulus COBRA subsidy by April 18, 2009.
The current rules also phase out the stimulus COBRA subsidy for workers with an adjusted gross income of between $125,000 ($250,000 if married filing jointly) and $145,000 ($290,000 if married filing jointly). Workers who earn more than $145,000 are not eligible for any of the subsidy, while those who earn under $125,000 might be eligible for the full subsidy.
Workers who are not eligible for COBRA coverage because their employers are not bound by the federal law, still might be eligible for the stimulus COBRA subsidy under state laws that provide for comparable continuation coverage. As with other Stimulus Act matters at this point, it is not yet clear exactly what comparable continuation coverage means and how the evolving rules will apply.
The stimulus COBRA subsidy is a good deal; but, you might be able to find a better short-term health insurance deal, particularly if you can make do with less health care coverage than you had through your employer. When shopping for a better deal, be sure to investigate your HIPAA rights and coverage differences from your COBRA plan or an equivalent state plan.
For more information and to track the evolution of the COBRA subsidy rules, see COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act Of 2009 published by the Employee Benefits Security Administration.
For information about unemployment help under the American Recovery and Reinvestment Act of 2009 in addition to the stimulus COBRA subsidy, see the blog post Unemployment Benefits Under the Stimulus Act. Consult an attorney for legal advice.
