Recently in COBRA Category

April 20, 2010

COBRA Subsidy, Unemployment Benefits Extended to June

The battle over continued extensions of the COBRA subsidy and emergency unemployment benefits continues in Congress. Last week, Congress passed -- and the President signed -- another stopgap measure, continuing these programs through May 31 (COBRA) and June 2 (unemployment benefits). Still under consideration: a bill that would continue these benefits through the end of the year, as part of a larger budget package. Although both the House and Senate have passed a version of this budget bill, they are sufficiently different to require reconciliation and another vote before becoming law.

This time, Congress waited long enough to extend these benefits that some people faced a gap in coverage. The original programs expired on April 5, but the short-term extension passed on April 15. Those whose unemployment benefits ran out must now reapply to receive compensation retroactively for the time they missed.

The unemployment benefits extension helps only those who had not yet exhausted their regular and extended benefits. Currently, between regular state benefits, the extended benefits program (which provides an additional 13 to 20 weeks of benefits), and the four tiers of extended benefits available through the Emergency Unemployment Compensation (EUC) program, unemployed workers in some states can collect up to 99 weeks of benefits. (Because some of these benefits depend on the state's unemployment rate, fewer total weeks of benefits are available in some states.)

The extension Congress passed will help workers who have not yet used up all of these benefits, by continuing the existence of these programs. However, workers who have already exhausted all available benefits through these programs won't be helped by the extension. For these very long-term unemployed, the only hope is the Congress will add a fifth tier to the emergency benefits program, making benefits available beyond the current 99-week maximum.

March 9, 2010

COBRA Subsidy Extended -- and Expanded

After the Senate finally convinced Senator Jim Bunning to stand down his one-man protest (covered in my previous post), Congress passed -- and the President signed -- an extension of the COBRA subsidy last week. (You can find the bill, called "The Temporary Extension Act of 2010," here.) The extension is clearly a stopgap measure: It lasts only until the end of this month (March), by which time Congress hopes to have passed a more comprehensive jobs bill that will keep the subsidy in effect through the end of this year.

But the one-month extension of the subsidy wasn't the only COBRA news in the Temporary Extension Act: The bill also expands eligibility for the subsidy to those who initially lose their health insurance coverage due to a reduction in work hours, then are laid off. This is a small but vitally important change: Many businesses have tried to weather the current economic storm by cutting back on hours worked (and how much employees are paid for those hours). The most recent figures from the Bureau of Labor Statistics (for February 2010) show that more than six million people are involuntarily working part time due to business conditions or lack of work. Unfortunately, given the current economic climate, many of these businesses will ultimately have to make deeper cuts -- and many of these involuntary part-timers will eventually lose their jobs altogether.  

The new law gives these employees another opportunity to elect COBRA coverage once they are terminated -- and, therefore, become eligible for the subsidy. A cut in hours that makes an employee ineligible for group health insurance through the employer's plan is already a COBRA qualifying event, and the new law doesn't change that. Nor does the law make employees who are still working at reduced hours eligible for the subsidy. What the law does is provide an additional election period to these employees if they subsequently lose their jobs and become eligible for the subsidy. If an employee initially declined coverage or elected coverage but let it lapse, the new law gives that employee another chance to elect coverage after a job loss.   

March 2, 2010

Senator Bunning Blocks COBRA Subsidy Extension

Toward the end of last year, Congress extended the COBRA subsidy provision. The original subsidy program applied only to those who were involuntarily terminated from September 1, 2008, through December 31, 2009. These former employees were entitled to a 65% subsidy of their continuing health insurance premiums for up to nine months. The extension increased the duration of the subsidy to 15 months. It also extended the eligibility period to include those who were involuntarily terminated through February 28, 2010. If you don't have your calendar in front of you, that was two days ago.

Last week, the House of Representatives passed a temporary measure that would have extended the eligibility period for another month, to the end of March 2010, to give Congress some time to get its act together and pass a more comprehensive jobs bill. But the Senate has been blocked from voting on the extension by Senator Jim Bunning of Kentucky. Bunning's camp says he doesn't necessarily oppose the measure, but wants Congress to stop passing spending bills that it can't pay for. (Bunning himself, in response to criticism of his action last week on the floor of the Senate, had a shorter comment: He is reported to have said "tough s%*t" in response to another Senator's remarks that Bunning should drop his opposition to the bill.)

Bunning has been taking a lot of criticism for his action, but that's nothing new for this Senator. After a public fight last year with the National Republican Senatorial Committee (which reportedly included a threat by Bunning to sue the group), Bunning announced he would not run for reelection. In recent years, Bunning's apparent gaffes, from his comments about Supreme Court Justice Ginsberg's cancer to his comment that an opponent in his previous reelection race looked like one of Saddam Hussein's sons, have garnered a lot of press.

Bunning's action prevents the Senate from passing the House's temporary measure by unanimous consent. If that procedural avenue is blocked, the Senate will have to override his objection or simply pass the COBRA extension as part of its broader jobs bill (which, in its current form, extends the program until the end of this year), either of which will take some time.

February 6, 2010

President's Budget Plan Includes Extension of COBRA Subsidy

We've heard a lot in the past week about President Obama's proposed budget, unveiled in conjunction with his State of the Union speech last week. Topic number one seems to be how the budget plan would affect the national deficit. Apparently of quite a bit less interest, judging by the limited press it's received, is the proposal to extend the COBRA subsidy through 2010.

It's been reported that the budget proposal would make the subsidy available to those who are involuntarily terminated from March 1, 2010, through the end of the year. These folks would be eligible for up to 12 months of subsidized health care continuation (employees who are involuntarily terminated up until the end of February 2010 are eligible for 15 months of the subsidy, based on the first extension, passed by Congress this past December).

Are people taking advantage of the subsidy? The answer is a resounding yes, according to a survey reported in Business Insurance. Large employers reported that more than twice as many laid off employees have opted to continue their health insurance through COBRA since the subsidy first became available.

If the subsidy extension passes, some state legislatures may have to get on the ball in a hurry. A number of states offer "mini-COBRA" laws, which typically provide the right to continue health insurance to those working for smaller employers (COBRA covers only those with at least 20 employees). These laws differ widely in the details, including what counts as a qualifying event and how long continuation coverage can last. But most of them have this in common: As long as former employees meet the other requirements for the subsidy (for example, they were involuntarily terminated and meet certain income restrictions), they are eligible for the COBRA subsidy, even if they are receiving continuation coverage through a state law rather than through COBRA.

To allow employees to take advantage of the subsidy, a number of states amended their laws -- for example, to give employees who originally passed up continuation coverage a second chance to elect coverage once the subsidy was available. However, some states tied their amendments explictly to the original time frame for which the subsidy was available, and so might have to take legislative action to make sure employees of smaller employers are still eligible if the subsidy is extended.

It's interesting to me that, at a time when health care reform has been described as "on life support," unconscious," or in terms of some other unfortunate medical metaphor, the COBRA subsidy -- which is, after all, government-funded health insurance -- enjoys wide popularity, inside and outside of Congress.

UPDATE: After it was blocked temporarily by a Senator, Congress passed -- and the President signed -- a stopgap measure that extends the COBRA subsidy until the end of March 2010. (Congress is currently beginning work on comprehensive jobs legislation which will extend the subsidy to the end of this year.) The stopgap bill also clarifies that employees who initially lost their health insurance because of a reduction in hours are eligible to claim the subsidy if they subsequently lose their jobs. Read about it here.  

December 21, 2009

Congress Extends COBRA Subsidy

Over the weekend, the Senate passed a defense spending bill that included -- among many other things -- an extension of the COBRA premium subsidy provision that's about to expire. (You can find the entire bill at the website of the Library of Congress; search for the bill number, H.R. 3326, then skip ahead to Section 1010). The House already passed the bill, and it's been sent to the President for signing.

Currently, the COBRA subsidy allows those who are involuntarily terminated from September 1, 2008, through December 31, 2009 to receive a subsidy of 65% of their COBRA premium payments for up to nine months. The subsidy went into effect on March 1, 2009, which means that the first group of eligible folks -- those who had already lost their jobs and have been receiving the subsidy since the effective date of March 1 -- used up their nine months of subsidy coverage on November 30.

The extension would:

  • allow those who are involuntarily through February 28, 2010, to receive the COBRA subsidy, and
  • extend the subsidy period from nine months to a total of 15 months.

The extension to 15 months of subsidy eligibility also applies to those who have already used up their original nine months. For example, someone who was laid off and began receiving the COBRA subsidy on March 1, 2009, would have used up the nine months of subsidized coverage a few weeks ago. Now, that person will be eligible for an additional six months of subsidy payments. And, this coverage can be retroactive: That is, if an employee's subsidy ran out, and the employee didn't pay the full cost of COBRA coverage for December, the employee will have an opportunity to pay the lower amount to receive retroactive continuation coverage.  

October 21, 2009

Will COBRA Subsidy Be Extended?

As the end of the year approaches, Congress and President Obama are considering whether to extend several important economic benefits to help ease the effects of the recession. For instance, the tax credit for first-time homebuyers, an $8,000 credit that one economist says will have resulted in 400,000 home sales during its tenure, is set to expire on December 1, 2009. Unemployment benefits are another topic of discussion: The House of Representatives has already passed a bill that would provide an additional 13 weeks of unemployment benefits in states with unemployment rates of at least 8.5%. The Senate is considering a different approach, which would extend benefits for 14 weeks in every state, and by an additional six weeks in states with higher unemployment.

And what of the COBRA subsidy, by which the government picks up almost two-thirds of the tab for continuing health insurance for workers who have lost their jobs involuntarily? (Learn more about the subsidy in this article.) The subsidy, which lasts for nine months, applies only to employees who are fired or laid off by the end of this year. According to Workforce Management, the percentage of eligible employees who actually enroll in COBRA has doubled since the subsidy went effect. The White House has said that it is considering  seeking an extension of the subsidy. So far, however, Congress doesn't appear to have taken up any legislation that would effect this change. If Congress doesn't act, workers who are fired or laid off after the first of the year will once again have to pay the full cost of continuing health insurance -- and, given the statistics above, many are likely to decide that this is a luxury they can't afford.  

March 3, 2009

COBRA Expansion in the Stimulus

The stimulus package -- formally known as the American Recovery and Reinvestment Act of 2009 (ARRA) -- includes a provision (PDF) that benefits those who have lost their jobs in the recent economic downturn: some help with their COBRA payments to continue their health care coverage. Before the ARRA, those who lost their jobs could continue their employer-provided health insurance through COBRA only by paying the full premium. Now, the federal government will subsidize almost two-thirds of the premium amount for up to nine months for certain eligible former employees. Here are a few basic facts on the new law:

Who's Eligible: Those who are involuntarily terminated from September 1, 2008, through December 31, 2009, are eligible for the subsidy, as are their spouses and dependent children. Even those who initially turned down COBRA coverage are eligible: Employers must give them a second chance to elect COBRA coverage by sending them a notice of the new special election period.

Length of Subsidy: The subsidy lasts for up to nine months. However, the subsidy will end sooner if (1) the employee becomes eligible for coverage under another group health care plan, or (2) the maximum period for COBRA coverage -- measured from the date the employee was first eligible, not the date the subsidy began -- ends (this limit applies whether or not the employee actually elected COBRA when first eligible to do so).

How the Subsidy Works: Under the new rules, the eligible former employee may be required to pay only 35% of the premium. The employer must pick up the remaining 65%, for which it may claim a subsidy credit against its payroll taxes on IRS Form 941, Employer's Quarterly Federal Tax Return. If the employee pays less than 35% of the full premium because the employer picks up most of the tab, the amount the employer may claim as a credit is less.

For more information, check out:

  • the IRS page on the new rules
  • the Department of Labor's page on the new rules (which should soon include model forms employers may use to inform employees of the subsidy and their election rights), and
  • the excellent resources available from the Society for Human Resource Management on the subsidy, starting with this comprehensive article (some resources may be available only to members).

Nolo's article New COBRA Rules: Stimulus Package Subsidizes Continued Health Insurance also has more information about eligibility for this health insurance subsidy.