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The following news release was issued last week by the Employee Benefit Research Institute (EBRI):

COBRA Premium Subsidy Helped Fewer Than Expected

The federal subsidy to help laid-off American workers pay for continued health care through the COBRA program helped fewer individuals than expected–in part because COBRA premiums remained unaffordable for many families even with the subsidy, according to a new article by the non-partisan Employee Benefit Research Institute (EBRI).

As part of congressional efforts to blunt the impact of the recent economic recession, the American Recovery and Reinvestment Act of 2009 (ARRA) included a provision for the federal government to pay 65 percent of the premium for individuals who were covered under COBRA and who incurred an involuntary job loss between Sept. 1, 2008, and Dec. 31, 2009.

The subsidy was made available for up to nine months, and was extended by Congress three times, with the last extension occurring in April 2010. This article examines trends in coverage through a former employer to analyze the impact of the COBRA subsidy.

In assessing how the program performed, EBRI notes that there are widely conflicting estimates of how many people benefited from the COBRA subsidy, but generally there has been lower-than-expected take-up of the subsidy. EBRI used the latest data from the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP), a nationally representative survey, as the best available benchmark.

“The COBRA subsidies that became available in April 2009 do appear to have had an impact on the percentage of non-workers with coverage through a former employer,” said Paul Fronstin, director of EBRI’s Health Research and Education Program, and author of the article. “But they appear to have assisted far fewer than the originally estimated 7 million individuals.”

Fronstin said these findings have implications for the impact of the subsidies that will become available in 2014 under provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA), and may mean the number of uninsured may not fall as much as predicted.

The full article is published in the October issue of EBRI Notes, available online at www.ebri.org.

Among the article’s findings:

Costs of COBRA Coverage: The lower-than-expected take-up may be due to the fact that, even after the subsidy, COBRA premiums may not be affordable for many families, especially at a time when they have seen a decline in income. Health insurance premiums averaged $4,824 a year for employee-only coverage and $13,375 for family coverage in 2009. After the subsidy, premiums would be $1,688 for employee-only coverage and $4,681 for family coverage. Furthermore, whereas premiums for current workers’ employment-based coverage are either excluded from taxable income or reduce taxable income, COBRA premiums are generally not tax deductible. (continue reading…)

This is Part 3, of a three part article.  For Part 2, see Employers, What You Need to Know About the Federal Stimulus Package: Part 2.

This article was written by Connie Chuang and Gage C. Dungy, attorneys with the labor and employment law firm of Liebert Cassidy Whitmore.

In the beginning, some covered individuals may not become aware of the new federal subsidy and therefore continue to overpay their COBRA/Cal-COBRA premiums by paying the full premium amount.  In order to reimburse the covered employee in this situation, employers will have an initial choice of either providing a refund or a credit to be used against future premium  payments.  The credit option is only available if it is expected that the full credit will be used by the individual within 180 days of the date the full COBRA premium amount was paid. (continue reading…)

This is Part 2, of a three part article.  For Part 1, an introduction, see Employers, What You Need to Know About the Federal Stimulus Package: Part 1.

This article was written by Connie Chuang and Gage C. Dungy, attorneys with the labor and employment law firm of Liebert Cassidy Whitmore.

Qualified Individuals on COBRA/Cal-COBRA Can Now Receive a 65% Federal  Subsidy for Health Insurance Premiums for up to Nine Months.

Employees who were involuntarily terminated between September 1, 2008, through December 31, 2009, will be eligible for a 65% federal subsidy of their COBRA/Cal-COBRA health insurance premium payments.

For example, an employee who normally pays $1000/month in health insurance premiums under COBRA/Cal-COBRA, would only be required to pay $350/month (35%) because the other $650 (65%) would be covered by this federal subsidy.

The federal subsidy ends after one of the following circumstances occurs (whichever comes first):

• Nine months after the first receipt of the subsidy;
• The employee becomes eligible for coverage on another employer’s plan (or Medicare); or
• The maximum period of COBRA/Cal-COBRA coverage ends.

The subsidy plan became effective on the day the federal stimulus package was signed into law.  However, for individuals whose health insurance premium payments are paid on a monthly basis, the plan becomes effective on March 1, 2009.  Although the time period for qualification dates back to September 1, 2008, the federal subsidy does not apply retroactively before the effective date of the law. (continue reading…)

(Originally published by Anthem Blue Cross April 24,2009)

The new CalCOBRA legislation, California Assembly Bill 23, is expected to be signed by the Governor by the end of this week. This bill will align the current CalCOBRA legislation with the Federal Subsidy as defined by ARRA (American Recovery and Reinvestment Act). The following are high-level details you should be aware of:

• This bill states that health plans and health insurers have 14 days from the date of enactment to provide proper notification to those individuals who may qualify for the Cal-COBRA subsidy. The Department of Labor (“DOL”) has agreed that the timeliness within which the state mini-COBRA programs must comply is to be determined by the states themselves. The DOL held a call with the California Department of Insurance (“CDI”) and the Department of Managed Health Care (“DMHC”) to assure this is understood by all three regulators.
• The mailing will go out to all individuals who had a qualifying event between Sept. 1, 2008, to the present, regardless of whether or not they had already elected CalCOBRA.
• The bill (AB23) currently states that California residents who were involuntarily terminated from their jobs between Sept. 1, 2008, and the present will qualify for the Cal-COBRA special election period.
• There is a notice letter being developed by Anthem in conjunction with the California Association of Health Plans (“CAHP”) and other health plans in this state. Once finalized, this notice will be deemed approved by both the CDI and DMHC. Anthem will send the notice as soon as possible following the enactment of AB 23.
• Once the bill is finalized and signed into law, Anthem will share a more detailed summary of the specific provisions of this law.

To continue reading “In the Interim“