Important Points About COBRA Subsidy Plan under American Recovery and Reinvestment Act of 2009

Last updated on Mar 5, 2009

Posted on Mar 5, 2009

Wanted to share some important and salient points about COBRA Subsidy plan.

  • Valid for people who were involuntarily terminated between September 1, 2008 and December 31, 2009
  • To be eligible annual income cannot exceed $125,000 for a single person and $250,000 for a couples
  • 65% of existing COBRA premiums will be subsidized by the U.S. Treasury Department
  • Subsidies will be available for up to 9 months
  • If you declined COBRA coverage after September 1, 2008 you will have the option to re-enroll into COBRA with the above subsides
  • Notices of the COBRA subsidies and re-enrollment information will be sent from the COBRA administrator (usually your previous employer)
  • Subsidies will be paid, via a refundable tax credit, directly to the COBRA administrators
  • Subsidies will terminate if the enrollee acquires a new health insurance plan through another employer or is eligible for Medicare
  • Subsidies will only apply to COBRA premiums paid after the effective date of February 17, 2009 and there will be no refund of premiums prior to this date
  • Subsidy Starts: Reduced premiums will generally begin in March, the first full month after the bill was signed.
  • Eligibility: Laid-off employees and their family members who are eligible for and elect COBRA between September 1, 2008, and December 31, 2009, can receive the subsidy. In addition, eligible employees who lost their jobs between September 1 of last year and February 16 of this year who either didn’t sign up for COBRA or who signed up but dropped the coverage have another chance to sign up and get the reduced premium. Watch your mail: Your plan should notify you by April 18 that you have this second opportunity to sign up. Once you receive the notice, you have 60 days to elect the coverage.
  • There are also income limitations. To be eligible, your modified adjusted gross income in the year you receive the subsidy can’t exceed $125,000 ($250,000 for families). If it does, you’ll have to repay all or part of the amount of the premium reduction.
  • How to Sign up: You have to fill out enrollment forms that you receive from your health plan or employer. If you haven’t heard from them yet, call and ask when you can expect to get the documents.
  • How to get cheaper rate if already paying for COBRA: Contact your former employer or insurer and ask them to send the documents so you can sign up for the subsidy. As discussed above, if you’ve already made a March or April payment, your employer or insurer will reimburse you or give you a credit against future premiums. Once the system is up and running, you’ll be responsible for paying 35 percent of the premium, and the government will cover the other 65 percent.
  • How to change the COBRA coverage: If your company offers a cheaper plan, you may be able to switch. It’s up to the company. If it’s allowed, the company has to notify you of that option. Then you have 90 days to elect to change.
  • When you say it is retroactive to September 2008 do you mean I can go back and get the discount from my ex-employer from December 1 which is the first month I paid the full premium? the subsidies will take effect from March 1 – meaning that you will see the lower charges after March 1, 2009; but the effective date of eligibility of people laid off will now start from Sep 2008, although the bill became law in February 2009.
  • Employer was without COBRA, Am I covered? You may be. Many states have continuation coverage, “mini-COBRA” laws, that allow workers at companies with fewer than 20 employees to extend their health insurance with their former employer, similar to the federal COBRA law. The subsidy generally applies to workers at small companies in these states and to public employees. However, states with continuation coverage are not required to offer a second election period to workers who didn’t sign up originally or who signed up and dropped the coverage. They may choose to do so, however. You can call the Department of Labor at (866) 444-3272 for more information.
  • If I can get group coverage from another source, can I still choose subsidized COBRA coverage?No. If you’re eligible for coverage under your spouse’s health plan or Medicare, for example, you can’t get the premium reduction. Likewise, if you get a new job that offers group coverage, you can’t hang on to the subsidized COBRA coverage.
  • How to appeal if I get turned down for COBRA Subsidy: Either the Department of Labor or the Department of Health and Human Services will determine whether you’re eligible. The process for filing an appeal is still being ironed out. Check the DOL website or call (866) 444-3272 for more information.

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