July 1st, 2009 
Vijaianand It has been 4 months since Mr. Obama signed the Stimulus bill and made American Recovery and Reinvestment Act of 2009 in Feb 17, 2009. It encapsulates number of tax incentives, extension of unemployment benefits and more bail out options. Many of those incentives and benefits are still not properly adapted and implemented by the concerned parties due to the lack clarity in the process. I talked about the incentives in my previous blog post. In this blog post, I am interested just about the unemployment benefit extension, COBRA Subsidy program which I hear many unemployed people are having tough time getting credit.
Like Home Mortgage Modification plan when many lenders were hesitant to signup because of the complex process which is creating borrower anxiety. COBRA subsidy also fall under same category where streamlined process is not in place and employers were still looking for more instructions the government to implement.
When announced, it was meant to help unemployed workers by reducing their burden of paying health insurance upto 65%. Is it really helping? That’s a question to be answered by Obama office and we won’t go there. I did some research and collected details on COBRA subsidy to post this blog with facts and figures.
What is COBRA?
If you are laid off, you should be aware of COBRA. Employers are required to offer COBRA by federal law to let the employee keep their health insurance plan when they lay off. If you aren’t aware and don’t remember employer offering this option, please contact your employer immediately. The coverage typically is available for 18 months but employee will end up paying the full insurance premium(with no employer discount) plus 2% admin fee.
It is an expensive coverage but helps in great extent for individuals who may not be able to obtain new coverage due to preexisting conditions. If you paid for $300 as a health premium for your family, you will end up paying $1000 + 2% fee apx when accept the COBRA coverage after you are laid off.
COBRA Subsidy
Under the new ARRA 2009 act, the subsidy will cover 65 percent of premiums for nine months. There are some caveats as usual. The subsidy will apply to premiums paid for periods of COBRA coverage beginning on or after February 17, 2009. It doesn’t do any good for self employed who has their own individual health insurance plans.
For more details, check it out at irs.org
Does it really helps?
Many people are just getting by an average unemployment weekly benefit of merely $300- $350. With COBRA, people need to pay 100% of premium + 2% fee, cost comes around $900-$1200 per month for a reasonable plan. Under the new bill considering the subsidy, they’re still looking at spending close to $400 – $500 a month out of their pocket. It helps but not to a great extent. People are going to have to think long and hard about whether they can afford to extend their coverage under COBRA.
Loop Holes and Hassles
After reading comments from people on different sites, I summarized this section to bring to attention about some holes and hassles which is creating lot of frustration.
1. You might end up paying 35% of the premium from the day when you are laid off or lost your medical coverage not when you sign up for COBRA. If you lost the job in March and signed up COBRA in Jun 2009 because of process delay or any reasons. You still end up paying premium from the day you lost your medical coverage.
2. It can take months until you get information about COBRA subsidy from your employer. Be prepared to shell out 100% premium for those months which can be refunded or credit back as soon subsidy kicks in.
Help Available
I also found these information for people who are waiting for COBRA to kick in. If you don’t have COBRA yet, during emergency, a county hospital will take you in. You will get a bill, but once the subsidy comes in, you can submit the claim to your COBRA carrier to get it refunded.
For prescription, You can try PPA – Partnership for Prescription Assistance. Go to their website, see if your Rx is on their formulary, if they are, download and fill out the form, have your Doctor complete the rest and mail it in to the address on the form. You should get an answer within 30-days for free or low-cost Rx drugs until you get your insurance.
Check out the lastest update about the COBRA subsidy posted on U.S. Department of Labor website. For more questions, you can also call their hotline at 866.444.3272(no charge).
Families USA, a non-profit healthcare advocacy group, has posted a page with detailed information about the subsidy.
More Resources
8 questions about COBRA Subsidy
www.retirementrevised.com
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