COBRA in the American Reinvestment Recovery Act
Editor’s Preface: The new American Recovery and Reinvestment Act (ARRA) is a revolutionary step in addressing our most vital economic challenges. A significant portion of the money doled out by the ARRA ($59 billion) will go towards immediately addressing the health crisis. This is the second part in a two-part series on subsidies for COBRA in the ARRA. We have also extensively covered this subject in “COBRA Health Coverage in a Bad Economy” and “Stimulus Package and COBRA Health Coverage.” You can find Part 1 of this series at: “COBRA Health Subsidies and the Economic Recovery Act“
COBRA Subsidies and Your Health Insurance
Knowing who is and isn’t qualified for this 65% COBRA subsidy coverage can get a little sticky. The ARRA only provides the subsidy to AEI, or “assistance eligible individuals.” Who qualifies as one of these special AEI’s? Anyone who is eligible for COBRA coverage on or before September 1, 2008 or on or after December 31, 2009. This is an interesting way of looking at things, because wouldn’t it just be simpler to say anyone on or after September 1, since December 31 falls after that date? Moving on. An AEI is also someone who chooses to use COBRA during the original COBRA period, or during a special period of coverage. Just what is a special period of coverage? This special election period begins on the date of enactment of the ARRA and ends 60 days after the person’s health plan administrator provides the required notice to the individual. You also have to be covered by COBRA via an involuntary termination (covered in my last post) by your former employer’s health insurance coverage plan.
So now that we have a clearer idea who is and isn’t eligible for coverage, let’s look at costs. This subsidy will only require an individual to pay 35% of what they would normally be required to pay. So if you were looking at paying $1000/month for COBRA coverage, your health plan can only require you to pay $350. The federal government will then turn around and reimburse your former employer for the remaining 65% of your COBRA coverage fees. When could you lose access to this subsidy? Nine months from when you begin accessing it, if you become eligible for another groups’ health care plan (either through a new employer or through purchasing your own health insurance plan) or end of the maximum COBRA coverage period required by law, a maximum of 18 months. This seems a bit confusing. 9 months seems to be the consensus on how long you can cash in on this subsidy for. Why, then would there be information out there saying that you could extend this subsidy to the maximum COBRA coverage period nearly twice as long? I did find information on what two distinct groups are allowed to access this extension, and they’re very specific, so pop the phrase “How does the ARRA extend the COBRA coverage period” into Google and you get some great answers.
How would you know if you were eligible for COBRA in the first place? Unfortunately, if you haven’t been notified by a current or former employer, you might not be eligible. The company that I work for sent COBRA notices to employees a few weeks after I started working there, and have continued to send updated information as it becomes available. Your employer is required by law to let you know if you are eligible for COBRA through your work’s health insurance plan.
All in all, is this new legislature a good thing? Is it going to help where COBRA has only hurt the pocketbooks of Americans before? I’m hopeful. I’ve seen nothing but complaints of those who want to access COBRA but are astounded by the costs. This 65% break will definitely help ease the burden, but in this economy, 9 months’ cushion might not be enough time to find a new job with better, more affordable health insurance. Only time will tell how the ARRA and its subsidy will help those in need.
photo credit: CuriousDanielson