Are You Confused About the US Stimulus Package and COBRA Extensions?
As you probably know, COBRA is a federal law that forces some employers to keep terminated empoloyees in their group health insurance for several months. However, the employers do not have to keep paying the portion of the premium they pay for active employees. So the cost of health insurance can skyrocket just when a family loses a source of income.
The US stimulus bill addressed this by extending help paying the premiums to some terminated employees. There is some confusion, which I want to address.
Contact Your Ex Employer About the Stimulus
Contact your former employer, not the government, to take advantage of the COBRA subsidy. If you were laid off since September 1, 2008, and are already receiving COBRA coverage, then you’ll pay 35% of the COBRA health-insurance premiums, and your former employer will pay the remaining 65%. The government will then reimburse your former employer for the subsidy through a payroll tax credit.
If you were laid off on September 1, 2008, or later but didn’t sign up for COBRA coverage, you’ll get a second chance to elect COBRA and benefit from the subsidy. You should receive a notice from your former employer soon, or contact your former employer to find out about the steps for signing up.
The US COBRA Stimulus Payments are Limited
Federal law requires most companies with 20 or more employees to let former employees keep group health-insurance coverage for up to 18 months after they leave their jobs. But the 65% COBRA subsidy lasts for only nine months. After that, the premiums will jump back to the full price – and the average employer health-insurance plan costs $12,680 per year for family coverage, according to the Kaiser Family Foundation.
COBRA vs. Individual Health Insurance
If you have health issues, COBRA may still be your best bet despite the hefty price tag. But many people can find a better deal by buying their own health insurance. You can get price quotes for individual health insurance policies, or find a local health-insurance agent at the National Association of Health Underwriters Web site. Check out your options at least one month before your COBRA subsidy expires so you’ll have plenty of time to find out how much an individual policy would cost.
The subsidy ends if you find a job and your new employer offers health-care coverage or you become eligible for Medicare. And COBRA does not apply if the company stops offering health coverage to current employees or shuts down entirely.
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