COBRA Health Subsidies and the Economic 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 two-part series by Tara Barnes will delve into the benefits of the stimulus package’s COBRA subsidy. We have also extensively covered this subject in “COBRA Health Coverage in a Bad Economy” and “Stimulus Package and COBRA Health Coverage.”
It cannot be denied-COBRA is a huge topic in the United States right now. People are up in arms about COBRA coverage (as can be seen from response here on previous blog postings) and some significant changes and new legislation put into place by the Obama administration may change the face of COBRA.
Spending in the ARRA for Health Insurance and Care Compared with Other Sectors
The ARRA (the American Recovery and Reinvestment Act) was signed on February 17, 2009 and directly affects the COBRA continuation coverage rules. Because so many Americans are upset with the way COBRA coverage works, will these changes benefit or hurt those who need to rely on COBRA to keep their health insurance? Are these new changes really going to make a difference in the things that citizens are frustrating about, like the monthly cost of COBRA? Read on to find out about the new act passed and how it will affect COBRA for those people living in the real world.
What Will the ARRA Do with COBRA?
Sometimes reading through breakdowns of any piece of legislation can be like trying to decipher something written in gibberish. The language is often hard to read and completely understand, so I’ll attempt to break it down into layman’s terms. The ARRA promises to:
- “Provide a 65 percent federal government subsidy of COBRA continuation coverage premiums for a maximum of nine months for certain individuals who are COBRA qualified beneficiaries because of a covered employee’s involuntary termination of employment.”First off, it’s important to understand what a subsidy is. A subsidy is a grant paid by a government to an enterprise that benefits the public. So in this instance, the government is saying that it will pay for 65% of the cost of someone’s COBRA coverage. The ARRA will ONLY pay 65% for 9 months, and will only help pay this amount if the person has access to COBRA coverage through their previous employer. The government will also only pay this 65% if the termination was involuntary. So in other words, if you quit your job versus getting laid off, the government won’t pay the 65%.
- “Requires employers to pay the 65 percent portion up front, and then allows them to deduct those costs from their Social Security and Medicare taxes.” This part seems a bit conflicting with the first enumerated point above. What is stated above makes it seem that the 65% coverage for a individual will be covered by government funds, yet it seems here that that 65% is to be covered by an employer. Perhaps the first month’s coverage after an employee’s termination is covered by the employer, and the subsequent months are covered by the government. It would help greatly if there was some clarification around this. Surfing around and doing some additional research online didn’t bring me any more clarity around this point.
- “Retroactively allows workers who became jobless as early as Sept. 1, 2008, and rejected COBRA coverage to reconsider and receive COBRA benefits.” This is pretty straightforward. If you lost your job back in September of 2008, took one look at COBRA and its costs and said “No thank you!”, you will be allowed a chance to reconsider.
- “Extends COBRA continuation coverage periods for certain individuals receiving Trade Adjustment Assistance benefits or pension benefits from the Pension Benefit Guaranty Corp.” So if you’re one of the individuals who can get TAA assistance (TAA assists individuals who have become unemployed as a result of increased imports from, or shifts in production to, foreign countries) or benefits from the Pension Benefit Guaranty Corp (protects the pensions of nearly 44 million American workers and retirees in more than 29,000 private single-employer and multi-employer defined benefit pension plans), then you may get COBRA coverage for longer than the 9 months.
photo credit: Korean Resource Center 민족학교
Tags: american reinvestment and recovery act, ARRA, barack obama, COBRA, continuation coverage, health insurance, schip, stimulus package, subsidies
March 4th, 2009 at 2:42 pm
To clarify your confusion on who is paying the 65%, the employers pay it upfront and receive a tax credit that will cover the costs. So in the end the employer is not on the hook for the 65% subsidy.
March 4th, 2009 at 7:10 pm
[...] « COBRA Health Subsidies and the Economic Recovery Act COBRA in the American Reinvestment Recovery Act document.write(”By Tara BarnesContributing [...]
March 4th, 2009 at 10:23 pm
Millions of Americans who lost their jobs prior to September 1, 2008 could not afford Cobra. Millions more elected Cobra but have now depleted their resources and can not continue on. Still millions more with pre-existing conditions who rely on cobra to bridge the 18 month gap between their former employers insurance and their state’s high risk insurance pools are struggling to pay their premiums every month to prevent being locked out of insurance permanently.
Please join us in asking Congress and the Obama administration to eliminate the arbitrary September 1, 2008 cut-off date and 9 month limitation of assistance by signing our petition at http://www.ipetitions.com/petition/cobrareform and telling your friends about our efforts.
For more information please see our website at http://cobrareform.weebly.com.
April 7th, 2009 at 5:38 pm
Ihope this is in affect now have not heard from my employer yet out of work since feb. due to medical problems no insurance at all cant afford to go to drs do i have to call work?
Iand many others are so hopefull for this plan Bless Obama cause no one else cared.
May 17th, 2009 at 7:47 pm
This article was an eye-opener. Do you know how someone can apply for reduced COBRA costs and/or supplements? My COBRA cost is outrageously high and I am continually turned down on my applications for private health insurance. At this rate I’ll be broke and without health insurance before the end of the year.
June 11th, 2009 at 2:02 pm
I resigned from my job voluntarily but without gross misconduct on 10/10/2009 and lost my health insurance. I took a temporary job with the promise of a full-time position but the supervisor’s daughter got the job instead and I got the shaft. I have not had medical insurance since October since I could not afford COBRA. When the notice came through for the ARRA at a reduced rate I definitely applied and was denied because I resigned. I see no reference to this in the OMNIBUS stipulation (it was not through gross misconduct) so hopefully my company and others will be informed a little better and we will have medical coverage. I have high blood pressure and GERD and have gone without medical treatment and without my high blood pressure medicine. Is this what Pres. Obama wanted??? I don’t think so. Please help. Mary
June 22nd, 2009 at 8:17 pm
I ad to move to another school and take a lessor position as a substitute teacher. I have continued from the job of teacher’s aide that allowed me to have insurance at the school. I have not been able to get back in for an aide’s position and my premiums are impossible for me to pay since, I have no job at all during the summer and no income? Can I get some help in paying my existing Cobra bill?
June 22nd, 2009 at 8:19 pm
I need to see a form to fill out. My address is ……… I take one blood pressure med and vitamin D, I am in good general health.
August 2nd, 2009 at 4:00 pm
Does the ARRA 65% subsidy restart in the event of a second involuntary unemployment period. If so, is another full 9 months available or only any remaining months from initial covered period of unemployment?
August 21st, 2009 at 9:48 pm
I am currently on COBRA with your company. I was let go, 9/2008 my former employer refuses to help me in any way to get started with AARA I need help to get started. I could use some help with the necessary forms…..Please help
Thanks E.B.
If you could mail or e-mail the forms it would be Great!
September 1st, 2009 at 12:51 pm
I have my own health care coverage thru my employer (spouse and children covered under spouse’s employer) would my spouse be entitled to COBRA or would I be forced to put him on my plan at work?
December 9th, 2009 at 2:51 pm
It’s is very sad for our goverment to not help the american people better then this.The goverment should do somthing about cobra prices.To tell you the truth the goverment should pay more into health care for the american peolpe.We pay higher taxes for them to have free health care the best health in the medical field.They owe the american people to have good health care and free health care. why not they have it.If it wasen’t for the american people they would not have free health care.
May 23rd, 2010 at 8:40 am
I have recently been layed off. My COBRA cost will cost $313 monthly, it will cost $318 monthly to be added to my spouses policy.
Since it will cost $5 more to be on my spouses policy, do I qualify for AARA if elect COBRA?
Thank you.