Stimulus Bill's COBRA subsidy creates new obligations for employers

The economic stimulus package signed into law by President Obama on February 17, 2009, amends the Consolidated Economic Budget Reconciliation Act (COBRA), and creates new and immediate obligations for employers. The new law provides a subsidy to employees of 65% of the applicable COBRA premium, leaving the employees responsible for only 35%.  Here's how it works:

• The program is mandatory for employers required to offer COBRA continuation health coverage, and also for employers obligated to provide COBRA-like continuation coverage under federal and state law (including, e.g., government employers and employers with fewer than 20 employees who must provide continuation coverage under state law).
• Eligible employees are those who are involuntarily terminated from employment and have a qualifying event between September 1, 2008 and December 31, 2009. Individuals whose employment terminated before February 17, 2009, have 60 days to enroll, even if they initially chose not to elect coverage. The 60-day election period runs from the date the individual receives the required special COBRA notice.
• Employers have to pay the 65% of the premiums being subsidized, but get to reduce payroll taxes in the same amount for everyone who opts into the program. If the applicable premiums exceed the payroll taxes, the employers will be reimbursed directly through a program established by the Department of the Treasury.
• Premium assistance is available for up to nine months. The subsidy terminates if the employee becomes eligible for new employer-sponsored health care coverage or Medicare. The availability of premium assistance does not extend the period of COBRA coverage for which the individual is otherwise eligible.
• Assistance is phased out for taxpayers with a gross income in excess of $125,000, up to a maximum of $145,000, at which point no premium assistance is available (limits are higher for those filing jointly).
• Employers must provide notice of the availability of premium assistance. The Department of Labor will be publishing model notices.
• The law is effective for premiums due as of March 1, 2009.
  

Covered employers must review terminations back to September 1, 2008, to determine whether the terminations were involuntary and a new eligibility notice is required.

Comments

[Sheila]

Have you tried buying your own insurance? Check online to get range of quotes. In some cases, it's shockingly cheaper than even what some "employers" offer.

[Lori Bauman]

See more information at www.dol.gov/ebsa/cobra

[Matthew]

I was laid off Jan 6, 2009, and already declined medical coverage under COBRA due to its high cost (over $1400/mo). I understand that I may, under the new bill, retroactively elect or newly elect medical coverage. Is that correct? If so, will I be reimbursed for medical expenses incurred on my own between Jan 7, 2009 (my first day without medical coverage) and the time I restart my medical coverage?