The new federal government stimulus bill provides a 65% savings/subsidy to help pay for COBRA health insurance for individuals and families who have lost their jobs.
The federal law called COBRA typically requires that companies have at least 20 employees and that the companies must offer health-insurance benefits in order for the companies to continue offering coverage to employees who leave or lose their jobs. If you are paying for COBRA health coverage, be sure to check in with your employer about any administrative steps you need to take to receive the subsidy to help save on COBRA.
The process should be easy: You'll pay just 35% of the COBRA costs, and then your former employer will pay for the other 65% of the costs. The federal government will then reimburse the employer through a payroll tax credit. As an example, a monthly COBRA bill of $300 will be reduced to $105, and then the subsidy would cover the remaining $195.
However, the rules on this assistance get more complicated if you lost your job on September 1, 2008, or later but didn’t sign up at the time for the COBRA health insurance coverage because it was too expensive. In this case, you will in fact receive a second chance to elect COBRA coverage and therefore benefit from the subsidy. Employers need to send notices to former workers who are eligible for the COBRA health care subsidy. Those individuals and people will have 60 days after receiving the notice to sign up for COBRA insurance coverage and start receiving the subsidy.
What may delay the notice is the fact that many employers are waiting for the Department of Labor to issue a model notice before sending their own company notices. The Department of Labor has a deadline of until mid March to release its model notice. However, it can help, and definitely wouldn’t hurt to contact your former employer now. Or if you do not qualify, find how to get free health care from government clinics or even Walgreens!
Does everyone who currently has COBRA coverage qualify for this subsidy?
Not everyone. To qualify for this assistance, you must have been involuntarily terminated from your job between September 1, 2008, and January 1, 2010. You must also be ineligible for health insurance coverage under your Medicare, your spouse’s plan, or your parents’ insurance. In addition your income for the year must be less than $125,000 for individuals and $250,000 for families to qualify for the full assistance subsidy. The subsidy on COBRAS does phase out entirely once your total income reaches $145,000 for single filers or $290,000 for joint filers.
Does this new law extend my COBRA eligibility?
It does not. You can qualify for COBRA health insurance benefits to help pay for medical bills for up to 18 months after you leave your job. And unfortunately not everyone is eligible for COBRA as the federal regulation applies only to those companies who have 20 or more employees. In addition, COBRA does not apply if your company shuts down entirely or if the company stops offering health coverage.
Exactly how long does the COBRA savings last, and what will happen when it expires?
This new government subsidy will last only for nine months, and it is not retroactive. Therefore if you have already had COBRA coverage for months in the past, you will not receive a health insurance subsidy for the months before the law was passed.
You will have to pay the entire COBRA health insurance bill yourself after toy have received the subsidy for nine months, as the subsidy ends after 9 months. So a bill of $105 per month for subsidized coverage will go back to $300 a month.
At that point of COBRA going back up, you will need to consider your other options. If you are healthy and live in a state that offers a competitive health-insurance market, you may be able to receive a better deal with an individual health insurance policy. Or you can locate free health care from a charity.
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