COBRA
The New COBRA Subsidy!new
Overview
Under the American Recovery and Reinvestment Act of 2009, which was signed into law on February 17, 2009, the federal government will pay 65 percent of the cost of COBRA premiums for up to nine months. Therefore, if you are eligible for the subsidy, you will only have to pay 35% of your COBRA premium. Your former employer covers the other 65% and is compensated by the Treasury through a tax credit.
This document provides information on the new COBRA subsidy to help you make an informed choice regarding your health insurance coverage if you lose your job.
Get more information online: Basic information about the section of the new law that affects COBRA can be found online at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf
You are Eligible for the COBRA Subsidy if:
  • Your 2009 individual income is less than $125,000 per year, or if your family income is less than $250,000 per year (eligibility for the subsidy begins to phase out at $125,000 for individuals and $250,000 for families, ending at $145,000 for individuals and $290,000 for families), and ...
  • Your employment ended between September 1, 2008 and December 31, 2009, and ...
  • At the time your employment ended, you were a member of an employer-sponsored group health insurance plan (you may currently be insured through COBRA, insured through a private plan, or uninsured), and ...
  • Your employer still exists (if the company was liquidated in a Chapter 7 bankruptcy, then group coverage is no longer available).
  • You lost your job on or after September 1, 2008 and did not choose COBRA within the required 62-day window. You are now eligible for COBRA again, as long as your former employer is still in business and still offers group health insurance coverage.
Note: The subsidy is not retroactive and only applies after the date the law went into effect. If you chose to receive COBRA benefits and started paying premiums before the effective date of the new law, you won't get any credits or refunds for the COBRA premiums you paid before the date the new law went into effect.
You are not Eligible for the Subsidy if:
  • Your employment ended before September 1, 2008 or after December 31, 2009
  • You left your job voluntarily
  • You were not insured under your employer's group health plan before your employment ended
  • Your employer did not offer health insurance benefits or has stopped offering benefits to the current employees
  • Your employer has gone out of business
  • You lost your group health coverage because your hours were reduced
  • You're eligible to join your spouse's employee plan or Medicare
Note: Companies with fewer than 20 employees are not required to offer COBRA coverage under federal law, but some states require these employers to offer benefits similar to those required under COBRA. If you live in one of these states, and your state's requirements are comparable to COBRA requirements, you may be eligible for the subsidy. Check with your benefits administrator to find out if you're eligible.
Advantages of COBRA with the Subsidy:
  • Your COBRA premiums are reduced by 65 percent for nine months.
  • You get to continue in the same plan you're already using through your employer, with the same physicians and benefits.
  • If you have a pre-existing condition that disqualifies you from other types of coverage, you can stay on COBRA at a reduced rate for nine months.
Disadvantages of COBRA with the Subsidy:
  • Even with the 65 percent subsidy, COBRA coverage may still be unaffordable, especially if you're living on unemployment benefits.
  • The subsidy lasts for nine months and COBRA coverage is limited to 18 months. If you haven't found a job by the time your COBRA benefits expire, and you've developed a chronic health problem or had a significant injury or illness, it may be harder to qualify for private health insurance.
COBRA Subsidy FAQs
How do I get the COBRA subsidy? First, make sure you qualify. The COBRA subsidy is administered through your former employer or benefits administrator. Make sure your employer has your most recent contact information so they can let you know when they're ready to administer the subsidy.
Note: If you qualify for benefits under your spouse's plan, another group healthcare plan, or Medicare, you're not eligible for the COBRA subsidy. If you fail to notify your COBRA plan administrator of your ineligibility, you may face tax penalties.
How much will I be reimbursed with this subsidy? When will I get my reimbursement? The COBRA subsidy covers 65 percent of COBRA payments made on or after March 1, 2009 for nine months. Qualified recipients may not begin to see reimbursements or reduced monthly COBRA premiums until May or June 2009. If you paid your COBRA premiums on your own in March and April and you're eligible for the subsidy, your employer should reimburse you for those costs, either through a refund or a greater reduction in future premiums, until you've recovered your costs.
When will my employer let me know if I'm eligible? Your employer has until April 18, 2009 to notify you that you're eligible.
If I want the subsidy, but I am not currently enrolled in COBRA, does that matter? No, you don't have to be currently enrolled in COBRA to qualify for the subsidy. If you lost your job ...
  • Between September 1, 2008 and February 16, 2009, you'll be eligible for a Special "COBRA Election Opportunity": this means you'll have 60 days to enroll in COBRA from the date you receive the notice from your employer.
  • On or after February 17, 2009, all you need to do is sign up for COBRA. If you were offered COBRA and declined, but now want to accept COBRA because of the subsidy, be sure to contact your previous employer and let them know you changed your mind before the end of your 60-day election period.
Does the subsidy apply to my state's COBRA extension program, which requires employers with fewer than 20 employees to provide benefits through COBRA? It depends on the state and its COBRA extension program rules. Although COBRA does not apply to companies with fewer than 20 employees, many states have programs that extend similar benefits to employees of companies with fewer than 20 employees. It depends on the state you live in. Logon to www.coverageforall.org or check with your state insurance commission for more details.
On what date does my nine months of subsidized COBRA benefits begin?
  • If you're eligible for the subsidy and lost your job between September 1, 2008 and February 16, 2009, your eligibility begins on March 1, 2009.
  • If you lost your job after February 16, 2009, your eligibility for the subsidy begins in the same month that you become eligible for COBRA.
  • Anyone whose employment ends after December 31, 2009 will not be eligible for the subsidy.
If my former employer is already paying for a percentage of my COBRA premiums, can I still get a subsidy?
Yes, the subsidy covers 65 percent of what you're currently paying out of pocket for your COBRA premiums, even if your employer is already paying part of your premium.
Example: If your monthly COBRA premium is $500 and your employer pays half ($250), the 65 percent subsidy applies to the remaining $250. The subsidy would cover 65 percent of the $250 ($162.50), and then you would pay the remainder ($87.50).
I worked for a non-profit organization and lost my job. Am I still eligible? Assuming you meet the other qualifications, you are entitled to the subsidy, even if you worked for a non-profit.
I was on disability for nine months, and then my employer terminated me in February. Am I eligible for the subsidy? Yes, you are eligible for the subsidy as long as you were terminated involuntarily (for reasons other than gross misconduct) and you're not eligible for health insurance coverage through your spouse's health plan or Medicare.
I lost my job and am recently divorced. My ex is still covered by my group plan through COBRA. Does my ex qualify for this subsidy? Yes, as long as he or she qualifies for COBRA under your group plan and is not eligible for another group plan or Medicare.
I've been on COBRA since January. Will I be reimbursed 65 percent of the premiums I've paid? No, the subsidy is not retroactive.
Does the new COBRA subsidy cover anything besides monthly premiums? No.
I made more than $145,000 in 2008, but I make less than that now that I'm on unemployment. Do I still qualify? The income limits apply to the 2009 and 2010 tax years. Eligibility for COBRA subsidies doesn't depend on income, but:
  • If your 2009 income exceeds $145,000 for individuals, or $290,000 for families, you'll have to reimburse the government for the amount you were subsidized when you file your income taxes.
  • If your income is between $124,000 and $145,000 for individuals, or $250,000 to $290,000 for families, you'll have to repay a portion of the subsidized amount.
Is the income limit based on total income or adjusted gross income? The income limit is based on a taxpayer's adjusted gross income in the 2009 and 2010 tax years.
Where can I get more information?
You have several options:
1. The Department of Labor: http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html
2. Employer notices: http://www.dol.gov/ebsa/COBRAmodelnotice.html
3. FAQs for Employers on COBRA Premium Reduction: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html
4. Expanded FAQs for Employees on COBRA Premium Reduction: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html
5. Updated FAQs for Employees on General COBRA Provisions: http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html
6. If you're unemployed, talk to your former employer's benefits administrator or HR representative to understand your eligibility for these newly proposed benefits. Details of the subsidy may change, so check with your benefits administrator for updates.
7. If you're unemployed and cannot afford health insurance or do not meet the qualifications for COBRA or individual health insurance, visit www.coverageforall.org. This website includes a database with more than 176 government-sponsored programs in 50 states and the District of Columbia to help people find public health coverage. Sponsored by the Foundation of Health Coverage Education, CoverageForAll also offers a free 24/7, multilingual U.S. Uninsured Help Line at 1-800-234-1317.
NOTE: This summary is intended to provide general information. It does not offer legal advice or provide a comprehensive analysis of any given topic.
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