Obama Stimulus Plan: COBRA provisions for unemployed workers

UPDATE: The COBRA Subsidy Plan (under the American Recovery and Reinvestment Act of 2009)has been implemented and it retroactive to Sept 2008. You need to contact your HR/Benefits department you are now to pay only 35% of the premium for 9 months and the employer has to get the rebate from the IRS. So, please contact your HR Department as they should be able to handle this for you. If you have any questions or thoughts please do share with us all. Check out the details and Frequently Asked Questions on how to avail the COBRA Subsidy plan at this link.

A small but very significant measure – at least for normal employees – in the stimulus bill from Barack Obama is raising heckles for the companies across the US.  This has to do with the COBRA provision – the medical insurance available to the employees who have been laid off.

The provision make companies responsible for extending health insurance to former employees age 55 and older or who worked for the company for at least 10 years and this extension of benefits would be permanent!

The other provisions are:

— If you were or are laid off between September 2008 and December 31, 2009, the stimulus bill provisions on COBRA subsidies would apply to you.

— The stimulus program would subsidize your COBRA payment (the House version would pay 65% of it, the Senate version would pay 50%) by giving the organization to which you pay your COBRA bill (typically your former employer) a tax credit. You would first have to pay your share of the monthly payment, then the stimulus package would kick in its subsidy payment (which is really a credit).

— If you lost your job within the designated period and did NOT elect to continue your health insurance under COBRA, your employer must offer you the opportunity to sign up for extension of COBRA coverage as soon as the bill becomes law. For those who maintained their insurance under COBRA, the federal subsidies are not retroactive — meaning, you won’t get any reimbursements for the cost of COBRA payments you’ve already made. Whether you sign on once the bill becomes law, or have stayed insured under COBRA continuously since you lost your job, the subsidy begins when the bill becomes law.

— Eligibility for the subsidy is a maximum of 12 months, and you lose eligibility for it once you become eligible for coverage under another group health plan — other than health flexible spending accounts. (COBRA benefits must be provided for 18 months by companies who lay off workers, and the bill paid by the laid-off worker — pre-subsidy — is the equivalent of 100% of the cost of coverage, plus 2%.)

— If you lose your job between the time the bill becomes law and 2010, and you haven’t exhausted your 12-months of subsidy coverage yet, you’ll be eligible for the subsidy.

The companies are campaigning hard to remove that measure from the bill before it gets Obama’s autograph.  Wonder who will win – common employee or the rich dudes in the corner offices?

Reference Links:

1. COBRA provision stimulus
2. Job loss: Stimulus package includes health insurance subsidy
3. Provision details courtesy: Sibson . LA Times blogs)