Under new proposal, COBRA premium subsidy would be extended again

As part of its proposed federal budget for fiscal year 2011, the Obama administration is recommending another extension to the COBRA health insurance premium subsidy – a move that Congress will most likely support.

If approved, employees laid off from March 1 through December 31, 2010, would be eligible for the 65% premium subsidy for up to 12 months. (Currently, employees who are involuntarily terminated from September 1, 2008, through February 28, 2010, can receive the premium subsidy for up to 15 months.)

“As long as unemployment remains at high levels and access to health insurance coverage remains spotty, the willingness to extend COBRA assistance will remain strong and persistent,” says Frank McArdle, a consultant with Hewitt Associates Inc. in Washington.

More and more employees are opting for COBRA as a result of the 65 percent premium subsidy – part of a broad economic stimulus package Congress approved nearly one year ago. In fact, Hewitt discovered in a survey of 200 large employers that the number of employees choosing COBRA more than doubled to 39 percent during a nine-month period last year.

According to the Society for Human Resource Management (SHRM), only laid-of workers who could not get coverage under another group health plan (such as a spouse’s plan or Medicare) would be eligible for the subsidy. In addition, premium assistance is only available for individuals with incomes under $145,000 and families filing jointly with incomes under $290,000.

If you’re a little bewildered about the various extensions and how to communicate them to employees, you’re not alone.

"… as originally passed, the subsidy was provided for a period up to nine months. In December 2009, the period was extended to a total of 15 months, and under the latest proposal it would be 12 months," says Karen Frost, health and productivity solutions leaders at Hewitt Associates in Chicago. "That's three different time frames and three different provisions."

As far as what this means to you as an employer, Frost suggests that the hardest part – adjusting to the original subsidy – is over.

"For the first extension, we just had to modify what we were already doing in terms of the subsidy. And the efforts around a second extension would be very similar. It's a modification; it's not a brand new game."

Until a possible second extension is approved, G.Neil recommends that you display a poster informing employees of their COBRA subsidy benefits to date.


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