Laid Off? Get Your COBRA Premiums Reduced


For those who have lost their job within the last six months, the price of health insurance just got a bit more affordable.

Thanks to the stimulus plan, many more unemployed people and families will be able to buy several months of discounted employer-sponsored health insurance though the Consolidated Omnibus Budger Reconciliation Act, or COBRA. COBRA permits you to purchase health insurance from your former employer at roughly the same group rate as the employer pays for as long as 18 months.

"Costs for COBRA could be $1,000 a month or more for an individual, depending on the coverage provided," says Kaye Pestaina, a vice president with Segal Advisors, a consulting company in Washington, D.C.

Now the bill may be less: The Obama administration is providing a 65% COBRA premium credit for employees who’ve been (or will be) “involuntarily terminated” between Sept. 1, 2008 and Dec. 31, 2009. That means your employer will pick up 65% of the total costs, up to a maximum of nine months, for your COBRA expenditures. (If you’re still without insurance after nine months, you’ll be responsible for the whole tab once again.)

Here's what you need to know:

Who's eligible for COBRA?
To qualify, you have to be eligible for COBRA coverage as a result of an involuntary termination of employment, from a company with 20 or more employees, any time from Sept. 1, 2008 through Dec. 31, 2009, according to the Department of Labor. If your resign from your job and opt for COBRA, the 65% credit does not apply.

Also, singles that make more than $125,000 per year, and married couples who file jointly who make more than $250,000, are not eligible.

What if I’ve turned down COBRA?
If you haven’t already requested COBRA coverage, or even if you declined it, that’s OK. You just need to make sure you sign up when the company offers it to you again. That offer should come within the next few weeks, if not already. Employees laid off between Sept. 1, 2008 and Feb. 16, 2009 have a second chance to consider and elect COBRA benefits, says attorney Mark Terman, an employment lawyer at Los Angeles law firm Reish Luftman Reicher & Cohen.

By April 18, 2009, employers must notify all assistance-eligible individuals of their right to the premium credits and tell them how to apply.

If you have questions, contact the human resources department of your former employer, visit the COBRA Premium Reduction FAQs page or call 866-444-3272 to speak to a governmental benefits advisor.

Will I be reimbursed for COBRA premiums I’ve already paid?
A good question, but the answer is no. The coverage itself is not retroactive. What this means is you can’t apply for repayment of COBRA premiums already spent. The Labor Department’s premium reductions apply only to coverage periods beginning on or after the stimulus passed Feb. 17.

What if my COBRA insurance is still too expensive?
There may be yet another way to reduce COBRA costs, says Terman. “If an employer's plan provides for different levels of medical insurance coverage to its current active employees, for example, HMO or PPO, an employer may decide to permit COBRA eligibles to switch to the coverage that has the lesser COBRA premium,” the attorney says.

Keep in mind, though, that you cannot switch to a stripped down dental-only, or flexible spending-only plan. Also, if you are eligible for other group health coverage (such as through a spouse's plan or a new employer’s plan) or for Medicare, you are not eligible for the COBRA premium reduction.

More information on the temporary reduction is available at the Department of Labor's web site.



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