COBRA changes could help recently unemployed with health care costs

While much has been made of how the newly signed federal stimulus bill will help big businesses and help build roads, the bill does have a provision that could provide direct financial help for thousands of recently laid off people in the Fort Smith region.

Inside the $787 billion federal stimulus bill — known technically as the American Recovery and Reinvestment Act of 2009 — signed today (Feb. 17) by President Barack Obama is a provision that expands COBRA coverage that could help the unemployed better afford continued health care coverage.

COBRA — named for the Consolidated Omnibus Reconciliation Act of 1986 — is a federal statute that provides workers and their families with access to 18 months of health benefits from their previous employer. However, the former employee must pay for his or her portion of what the employer once paid.

Stephanie Freeman, an agent with Konecny Insurance Services in Fort Smith, said the stimulus legislation provides two primary changes that could be valuable to thousands of Fort Smith regional workers who have lost their jobs in the past few months.

First, the legislation would fund 65% of the COBRA premium for those who became eligible for COBRA coverage between Sept. 1, 2008 and Dec. 31, 2009. The 65% reduction could result in savings of more than $1,000 a month for those forced into COBRA coverage, Freeman noted.

Also, the legislation gives the recently unemployed a second chance to enroll in COBRA coverage.

“People really need to know about this because it could be a big help. It could help put that (COBRA premium) money back into people’s pockets,” Freeman said Tuesday. “And another thing: Some people who might have been forced to drop health insurance because the COBRA costs were too much might now be able to afford the 35% rate.”

Eric Garvin, director of human resources at Peachtree Hospice in Fort Smith and president of the Western Arkansas Human Resource Association, said the new COBRA provisions will “certainly” provide financial relief from any people in the region.

“I believe that the stimulus package (though flawed) does have a few provisions that will be helpful to displaced workers. There have been several people displaced from their jobs in Western Arkansas and Eastern Oklahoma, and I hope that the updated COBRA provision in the Act will help alleviate some of their troubles,” Garvin noted in an e-mail statement. “The premium subsidies included in the COBRA portion of this Act will help many working families in the area that have been impacted by a recent job loss.”

The law is so new that many human resource managers likely won’t know how to implement the change until guidelines are released by the federal Department of Labor, Freeman explained. She said the new rules should be available within 30 days of President Obama’s signature.

Details of the COBRA change, according to the national Society of Human Resource Managers:
 
• COBRA Subsidy
Eligible workers will receive a 65 percent subsidy toward their health care coverage premium for up to 9 months.  The Treasury Department will administer the subsidy, providing employers or health plans, if they administer COBRA benefits, to receive a credit against payroll taxes for the cost of the subsidy. The subsidy would terminate upon offer of any new employer-sponsored health care coverage or Medicare eligibility.
 
• Employee Eligibility
Individuals who have been involuntarily terminated between September 1, 2008 and December 31, 2009 with annual incomes less than $125,000 (single) or $250,000 (couples) are eligible for the COBRA premium assistance, along with their family.  Qualified individuals, who initially decline COBRA coverage, would be given an additional 60 days after they receive notice of the special election period to elect to receive the subsidy. The election period begins on the date of enactment of the ARRA.
 
• Special Enrollment
The bill allows group health plans to provide a special enrollment right to allow eligible individuals to elect different coverage under the plan in electing COBRA continuation coverage.
 
• Notice Requirements
COBRA notices must include information on the availability of the premium assistance.  Model notices from the Department of Labor are due 30 days after enactment.
 
• Effective Date
These provisions are effective for premiums the first calendar month following the date of enactment.