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In the online edition of Smart Money today, Lisa Scherzer reports that an extension of the COBRA premium subsidy is considered likely to pass. She does not indicate what form the extension would take.
The government could extend the eligibility deadlines -- the premium subsidy is currently available to workers who lost their jobs between September 1, 2008, and December 31, 2009.
Or it could extend the length of the subsidy -- which currently lasts up to nine months.
Or it could even extend the length of time COBRA coverage is available to laid off workers -- COBRA is currently available for up to 18 months of unemployment for most former employees, but up to 24 months in situations involving special circumstances, such as disability.
Background on the COBRA Premium Subsidy
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) gives workers who lose their jobs, and their health benefits as well, the right to purchase group health coverage provided by their employer's plan, under certain circumstances. But COBRA coverage costs these former employees 100 percent of the premium (the employer's contribution + the employee's contribution) -- plus an additional 2 percent in administrative costs.
The American Recovery and Reinvestment Act of 2009 (ARRA) reduces these premiums and provides additional election opportunities for health benefits available through COBRA.
Under ARRA, eligible individuals pay only 35 percent of their COBRA premiums -- and the remaining 65 percent is reimbursed to the employer through a tax credit. This premium reduction applies to periods of health coverage beginning on or after February 17, 2009, and lasts for up to nine months.
Two more reports of growing support for extending the COBRA premium subsidy:
President, Congress weighing options on premium subsidy
Jerry Geisel, Business Insurance online, reports that employers should brace for an extension of the COBRA health care premium subsidy, which has led to a surge of laid-off employees keeping employer-provided coverage.
Last week, White House Press Secretary Robert Gibbs said President Obama is looking into whether the subsidy, embedded in economic stimulus legislation that the president signed into law in February, should be extended.
US Rep Hoyer: Looking At Further Extension Of Cobra Subsidy
Corey Boles, DOW JONES NEWSWIRES, reports that the House Democratic leadership is considering another extension of a federal program that subsidizes the cost of health-care insurance for people who have recently lost their jobs [COBRA], a top Democrat said Tuesday.
House Majority Leader Steny Hoyer, D-Md., said that congressional leaders are looking at a further extension of the program that helps families who lose their health coverage as a result of being laid off.
US Rep Hoyer: Looking At Further Extension Of Cobra Subsidy (http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=200910061300dowjonesdjonline000 402&title=us-rep-hoyerlooking-at-further-extension-of-cobra-subsidy - broken link)
On one hand I think this is very important legislation. On the other I think it's a huge burden for many small businesses who might need to lay further people off--or even close the doors--as a result. For a major corporation it's not all that big of a deal, but for a company with 52 employees, it could mean the difference between staying at 52 employees or cutting half a dozen jobs.
Does anyone know if there is a tax credit for these COBRA subsidies to the companies being forced to offer them?
Does anyone know if there is a tax credit for these COBRA subsidies to the companies being forced to offer them?
According to the IRS, employers do get a tax credit:
"Under the new law [The American Recovery and Reinvestment Act of 2009], eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage.
"Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return."
Thanks for the response. Based on this, I think it's a great idea. If nothing else it makes a company less likely to indiscriminately terminate an employee in order to replace them with cheap labor.
Congressman Sestak Introduces Legislation to Extend Emergency Healthcare
Congressman Joe Sestak (D-PA) has introduced legislation to extend assistance for unemployed workers to purchase health insurance. The Extended COBRA Continuation Protection Act of 2009 (HR 3930) extends by six months a provision from the Economic Stimulus Bill that provides 65 percent of health insurance premiums to individuals eligible for COBRA benefits who have been involuntarily terminated during the economic recession.
Sestak's bill extends COBRA benefits in three main ways:
(1) It extends by 6 months -- from 9 to 15 months -- the total allowable time an unemployed worker can receive COBRA premium assistance. This will allow workers who enrolled in the program in February to continue on until at least May 2010.
(2) It extends this assistance to individuals who are involuntarily terminated between January 1 and June 30, 2010.
(3) It extends eligibility for traditional COBRA coverage an additional 6 months, from 18 to 24 months, for those terminated at the beginning of the economic recession in 2008.
No extended COBRA premium assistance or extended COBRA benefits would extend beyond December 31, 2010.
Congressman Sestak has advocated for expanded COBRA benefits since entering office. He introduced H.R.694, the COBRA Coverage Extension Act of 2009, which would have extended COBRA coverage to 24 months. Further, he supported an amendment to H.R. 3200, the America's Affordable Health Choices Act, allowing individuals currently receiving COBRA health insurance coverage to stay on that coverage until new health insurance exchanges are in place. This amendment was adopted in the House Education and Labor Committee on which Congressman Sestak sits.
Is it favorable that this legislation will pass? Any idea when we will know?
It was just introduced yesterday -- so no comment from other legislators to date. The White House had said it would support such extensions before the bill was introduced.
Right now, the Senate is still battling out the latest unemployment extension and Health Care Reform -- so it remains to be seen if Sestak can push this legislation though below the radar in the House, and then get the Senate to agree with minimal controversy.
The unemployment extension legislation was passed by the House more than a month ago and has since been stalled in the Senate. But these COBRA extensions are far less costly, so they might go through more quickly.
Thanks for staying on top of this. I'm on the verge of losing unemployment benefits and the COBRA subsidy. I am on a state continuance plan (Maine Mini-Cobra) which allows temporarily laid off employees (so designated at the time of lay-off) from companies with less than 20 employees to qualify for COBRA. Normally COBRA aplies only to companies with 20+ employees. I'm wondering whether the proposed legislation applies to state continuance for people in my COBRA sub-class. Is there someone I should contact to press for such inclusion? Any ideas would help.
Thanks for staying on top of this. I'm on the verge of losing unemployment benefits and the COBRA subsidy. I am on a state continuance plan (Maine Mini-Cobra) which allows temporarily laid off employees (so designated at the time of lay-off) from companies with less than 20 employees to qualify for COBRA. Normally COBRA aplies only to companies with 20+ employees. I'm wondering whether the proposed legislation applies to state continuance for people in my COBRA sub-class. Is there someone I should contact to press for such inclusion? Any ideas would help.
Thx.
As far as I can see, this bill relates to federally funded COBRA only -- not the state mini-COBRAs.
But if you go to the site below, there are links to the text of the bill, as well as ways to contact the sponsor (Sestak) and your local Congresspersons to raise your issue with them.
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More Support for Extending COBRA Premium Subsidy
