Stimulus Package and COBRA Health Coverage
If you’ve never lost your job, you may not have ever heard of COBRA. COBRA is a health insurance plan that allows an employee who leaves a company for any reason to continue to be covered under the company’s health plan for a certain period of time. The name results from the fact that the program was created under the Consolidated Omnibus Reconciliation, and the system exists so that employees in between jobs can keep their coverage until they can hop into something new. This sounds just ducky, and it is definitely a nice option to have, people will find themselves paying full-price on all premiums for their coverage. They may still have the health insurance they’ve grown so accustomed to, but they’ll be paying out the wazoo for it.
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The new stimulus package includes subsidies to help pay for COBRA insurance coverage to those who have lost their jobs in our current economic hard times. This could be a welcome safety blanket for those who need a little extra monetary help while looking for a new job.
What Do COBRA Insurance Subsidies Look Like?
For those who lose their jobs, most end up spending nearly 84% of any unemployment benefits on keeping their health insurance. This price tag doesn’t leave much room for things like contributing to a rent or mortgage, buying food or paying utility bills. These subsidies from the government would take care of any health insurance expenses the unemployed are paying through COBRA, but know that they would only be good for a certain (two year) period of time. Unfortunately, it has yet to be decided what percentage of COBRA payments these subsidies would cover. Somewhere in the neighborhood of 75% would be fantastic for your average citizen, but if course it could be as low as 30-40%. Any break is a good break though, in tough times like these.
All this has come about because Congress feels that it is responsible for taking care of citizens in times of economic hardship, saying that the stimulus needs to provide both economic and health support.
Is COBRA the Best Option?
Some people have been at their job for decades, and all they know is the insurance coverage provided to them by their employer. Because they have never shopped around, they just assume that they’re getting the best coverage that’s out there, and so they opt to use COBRA to keep that insurance coverage going once they’ve lost their job. Don’t fall into this trap. Insurance companies are continuously revising their coverage and health insurance plans, and there might be a plan out there that is not only cheaper than paying for your company’s plan through COBRA, but will offer better benefits than you’ve been receiving all these years. You owe it to yourself to shop around, and what can it hurt?
photo credit: Center for American Progress Action Fund
Tags: COBRA, cobra health care, cobra health insurance, cobra health plans, cobra insurance coverage, economic stimulus package, economy, unemployment, unemployment benefits
January 27th, 2009 at 6:21 pm
What about the amount already paid? Borrowing from retirement funds and savings just to pay for.
January 29th, 2009 at 11:48 am
I’ve been paying $1000 a month for COBRA coverage since October. I’m about to lose coverage because my savings is wiped out.
I’ve had Individual famly coverage at various times and some of them do look better on paper than my current COBRA coverage. But every time I’m not on some kind of group policy plan everything has been denied until appealed, even well baby checkups or vaccines. An appeal can take a month or more.
I’ve looked at individual coverage, but before I buy anything I look online to see what peoples actual experiences have been and I haven’t seen anything encouraging. I can’t afford to pay out of pocket and only be reimbursed after a month of runaround.
I’d also like to mention that this is the first time I’ve been “wealthy” enough to afford COBRA.
January 30th, 2009 at 10:27 am
Stimulus, well it seems a case can be made either way, many people who do pay the cobra plans are those most likely to also use this period to find better jobs than a malmart greeter or to start a small business that would infact help the economy.
Extending COBRA coverage longer then 18 months really has little impact on the employer because 102% of the policy cost is being paid and it can actually let mid size companies have a larger pool that reduces the companies policy overall.
February 2nd, 2009 at 9:57 am
Extending COBRA coverage longer then 18 months really has little impact on the employer because 102% of the policy cost is being paid and it can actually let mid size companies have a larger pool that reduces the companies policy overall.
Disagree. If a person leaves, then runs up large medical bills, that cost is spread back across the entire company. Another part of the “stimulus” is hijacking Medicaid also, allowing laid off people to use that, so I’m not sure why they are doing it as it’s redundant. Since there’s no means testing for Medicaid, and this would require that someone pay 35% of premiums (per the latest draft), financially one wouldn’t use it anyway, but I’m sure some would. Just don’t think that it is free for employers or employees, as the pool costs could increase, and since most plans are paid for jointly, so would the cost to both employee and employer.
February 9th, 2009 at 4:27 pm
Matt is quite wrong. Extending Cobra should not change the actuarial calculations of the employer. The mix remains the mix. Also, Medicaid is indeed means tested. It is assistance for the medically indigent. Medicare
is not means tested. Important to keep them straight.
Extending Cobra for the 55+ group is an brilliant concept. If a person can afford it (I can) but could not qualify for regular insurance because of preexisting conditions (that’s me), and is finding it hard to land a regular job in their highly specialized field (me again), but, with Cobra, could earn a reasonable living by consulting – and if the cost to the employer is so negligible – why in God’s name not do it?
February 12th, 2009 at 12:52 pm
mike mertes
I think the extension of cobra for former employees over 55 is a win win.Think about it.The only people able to afford it would be people who worked hard had good jobs and now can’t get insurance because of a medical condition such as high blood pressure.This person might be forced to take a low paying job instead of say starting a small business.
please extend cobra now’s the time
February 12th, 2009 at 5:42 pm
Extending COBRA is really going to help people like myself, who are over 60; to old (in most cases) to find employment, but too young for Medicare. My understanding is that the subsidy is only in effect for one year, even though you could be covered under COBRA for 18 months. I haven’t seen anything that covers past that for folks whose jobs were terminated. What’s being proposed for expanding Medicaid is also confusing, because they are also addressing unemployed individuals, not necessarily at poverty level. Does anyone have a clear definition?
February 13th, 2009 at 11:04 am
Even though it was scaled back to 60% coverage for 9 months, the new COBRA provision in the final stimulus package should help millions of laid off workers. Taking away this headache from families will mean a lot.
February 13th, 2009 at 1:16 pm
David K is quite wrong. The mix (age/gender/etc.) is only part of the equation that underwriters use for premium calculations, the other is claims history. If COBRA participants have claims, they drive up the cost for the reminder of employees; this claims history remains with the employer for premium calculations several years. Since age is correlated with increased health issues and expeditures, its likely this change would drive up premiums for employers.
I think that if the government wants to cover unemployed folks until they retire, they should do so on a government plan or subsidize individual plans and not strap employers with the increased premium burden due to the likely increased claims costs nor the administrative burden of running the plans.
February 13th, 2009 at 7:00 pm
So the portion of the stimulus concerning COBRA will only be offered for unemployed workers age 55+??????? I was layed off in Aug 08 and my health insurance included in my severance expires 2/28/09. Will I gualify for this? How would I apply?
February 14th, 2009 at 11:24 pm
Cobra extension for 5 years is the right thing to do. It will not affect the price a company pays for health insurance because of the “pool” concept. This is just how insurance pricing works. Our Congress must fix this problem. Write and contact them again and again. Where is AARP on this?–MIA.
February 16th, 2009 at 1:50 pm
The impact of extended COBRA on a plan depends on the plan itself. For employers who are fully insured, the costs of claims are spread out amongst all of the employers purchasing coverage from that insurance company, so having a high claims for an individual does not hit as hard. However, there are many companies that are self insured – the COBRA premium charged to the former employee is calculated on average claims per employee, but it is possible for an individual on COBRA to have tens of thousands of dollars in claims each month although they are only paying $500 – $2000 per month. Since the employer is paying for the actual claims (and not just a “set” premium from an insurance company) these claims would have a definite impact on an employer. In my experience, people do not typically elect COBRA unless they have a known medical problem that has kept them from getting other coverage – in other words, only the more costly claimants tend to stay on the coverage. Older people, and the older spouses they may have on coverage with them, tend to have higher claims and more claims frequency. Allowing up to 10 years of COBRA coverage for people over 55 could devastate a self-insured employer. There has to be a better way.
February 16th, 2009 at 7:18 pm
Aything would help at this point. Being 57 unemployeed and having had bypass in 2000 I have to keep cobra no one will cover me and all my prescriptions. Beleave me I almost think if you have nothing it would all most be better to let it all go and do like somemany do ang use the emergency room as a doctors office. WHEN I get a new job I only hope they will offer coverage.
February 17th, 2009 at 4:54 pm
What about the people who are temporayily laid off and having to pay the premiums during that time? I’m going back to work hopefully March 30th and I’ve had to pay for my insurance out of pocket during that time or lose it. It’s not COBRA but I’m still having to pay the money out of pocket while unemployed. $200/ month on less than $1000 per month income is a real hit and insult
February 19th, 2009 at 11:19 am
I just recently heard that part of COBRA premiums for unemployed workers can be subsidized under the new stimulus package. I lost my job last February (2008) and have been paying COBRA premiums since April 2008. My premiums started out at $308.12 a month and recently were increased this year to $330.42 a month. If I am eligible for this subsidy, how much would it be and how do I apply for help? I have been unable to find a job still and I don’t know how much longer I can afford to pay $330.42. Could someone please answer these questions by e-mailing me at andie_campbell@hotmail.com. Thanks.
February 20th, 2009 at 5:48 pm
I went to work one day and fell flat of my face, did not know I would not work another day. I was on company insurance for a while then went to CObra payment of 499.85 a month, It was devestating for me, I had no idea what I was going to do with no money to pay this. I was also on expensive medication at this time which I had to pay for, I was social security elgible in aug 2007, I am still on cobra and it takes all I draw to pay for cobra, and medical pills, I don’t think that I am one of those people that qualiffy for help with these payments from the government, since I was not laid off, but had no other choice but to quit. There are no other options when you are sick I was turned down by every insurance co from the east to west, from the north to south before I choose cobra.
thank you
February 20th, 2009 at 10:25 pm
I was laid off in August and I could not afford the Cobra plan which for me and my husband ( stroke victim) came to about $ 990.00 a month. I am 55 and we have been going to a Public Health Center that really does not offer my husband the medical help that he really needs, will I be eligle for any Cobra or medicaid under this stimuls package, since I never signed up for it when I was laid off?
February 21st, 2009 at 5:48 pm
Response to R. Shue & A. Campbell
I found good info. on “About.com: Human Resources” check it out — http://humanresources.about.com/od/benefits/a/cobra_changes.htm
The Act provides 65% govt subsidy to employees who are involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidy is not retroactive, but will continue for a period of up to 9 months beginning on or after March 1, 2009.
The employee pays 35% of COBRA to employer, the employer will then request 65% reimbursement. Doesn’t look like you need to apply. Talk to the HR of your former company for more details. Hope this helps
February 22nd, 2009 at 6:52 am
Lets cut to the chase. How does one apply for this? I’m still trying to find out how much I’ll be getting in unemployment insurance. I was floored like many other responders that all of a sudden I was without a job. It was hard being the main bread winner sine my husband lost his, and here we are now both looking for work, both at home. Thank goodness all of the children are married. But they are experiencing hardships as well and now we cannot help them along. What a MESS!!! I can have Cobra through the paln I was on but it’s $1000 per month for my husband and I. What a MESS
February 24th, 2009 at 5:03 pm
[...] family healthy while you search for a new job. I’m sure that people who are looking to start COBRA coverage aren’t assuming that they will get coverage at the same copay prices that they were paying [...]
February 27th, 2009 at 11:40 am
What if your company shuts the doors. Does Health stimulus package cover that? If so, how will it work? Would my insurance company pay the 65% upfront?
March 3rd, 2009 at 1:48 pm
[...] 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.” [...]
March 17th, 2009 at 12:35 am
I received 6 months of severance pay (which included regular withholding for medical etc.) from April 2008 – Oct 2008 which ended in Oct 2008. I’ve been receiving unemployment benefits since then and have had to pick up Cobra Insurance. A question, will we be able to receive the 65% assistance for Cobra payments in the stimulus bill. This would help greatly since we had to pay about $5,000 in January 2009 (to pick up coverage from 11/01/08 through 02/28/09). Paid 3/1 and just got 4/1 bill and another 1200.00 is due…
April 17th, 2009 at 8:14 am
when does the stimulus start…soon it won’t matter if I get a 65% break…WTF are they waiting for?
April 30th, 2009 at 2:42 pm
My company closed my location making me eligible for the 65% sublidy. However, they sent to the COBRA provider the information that I
voluntarily retired..I did NOT retire–I was involuntarily terminated due to store closing. My HR department will not convey that info to the Benefits
division and thus to the COBRA provider. Who can I go to make them report the proper information so I can get the 65% subsidy?
May 4th, 2009 at 1:40 am
I worked for a union in construction and was laid off in 12/07, since then they have failed to find work for me. I had heath insurance credits built up and then started the cobra coverage. Then in 2008 I found employment in a completly different field, but this employment didnot provide any benifits. I got laid off in 10/08 and have stayed in good standing with the union and am still on the want to work list. I am still on the cobra insurance but they say I am not elligble for the 65% stimulus. I believe they are missenterpting the intent of the stimulus bill and will be discreminating against me if I am not allowed its access. I would appreciate advice on this if anyone has a handle on it, thanks.
August 28th, 2009 at 1:50 pm
Hi, I was “let go” from my employer on January 29, 2009. They gave me three months of severance pay which ended April 29, 2009. From that date on they offered me the same insurance but under COBRA. I pay the full premium every month to carry it on. I felt I didn’t have any choice because of my pre-existing medical issues.
I heard about the COBRA stimulus package in which I would be able to keep my insurance coverage and only have to pay 35% of the premium. I contacted my insurance company and they told me I was not eligible. Why would a person such as myself not be eligible? I am a single home owner who is getting some employment of $324 per week which is my only source of income. My mortgage is $710 and my insurance premium is $733 per month.
Why am I not eligible for that stimulus package offer? What can I do? Can you please help me?
September 10th, 2009 at 10:52 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.
September 11th, 2009 at 2:23 pm
I will be getting laid of in February 26, 2010. My severance will be for 18 weeks. Does my emoyer provide insurance thru the severance time, then i go to cobra? Does anybody have any ideas if the will extend the cobra stimulis? I sure hope so! I will be 58 @ that time and have never been laid off .
October 25th, 2009 at 11:35 pm
i just hope that the economy would recover very soon because of the Stimulus Package given by our government
October 29th, 2009 at 11:45 am
Like all of us !
November 14th, 2009 at 10:12 pm
Will this reduction in premiums (the stimulus) extend to 2010?