What the stimulus package means for COBRA
February 17, 2009 by Bill MeltzerPosted in: Cobra, In this week's e-newsletter, Latest News & Views
With the sharp rise in layoffs nationwide, many benefits departments are swamped with paperwork.
At least there’s a little good news. Many companies are relieved by the scaled-down COBRA subsidy that accompanied the economic stimulus package passed by Congress.
Under the original House version of the bill, there was provision to allow eligible workers to aintain COBRA coverage – at their own expense – until they became Medicare eligible (age 65) or received coverage from another employer.
The rule would’ve applied both to former employees age 55 and older and to workers who worked for the same employer for 10 or more years.
The final bill doesn’t change the COBRA coverage time limit. If the other bill had passed, it would’ve created a lot of extra burden on employers.
Even though workers take on the direct cost of COBRA coverage, employers are left to deal with legal compliance headaches, as well as administrative time.
February 19th, 2009 at 4:09 pm
We have a March 1 deadline and no specifics or sample notifications. We have to set up accounting procedures for the 65% and hope that our quarterly 941’s have a place to take the credit. We need to notify people who never responded originally that they have a second chance. Quite frankly, this is enough to make us crazy. However, should those other provisions have been enacted, it wouldn’t have been so bad. Sometimes older workers have the most difficulty, losing their jobs after many years, and unable to get health coverage at any price! To allow them to be covered under COBRA at full price would have been a blessing in some cases.
February 19th, 2009 at 4:47 pm
I agree with Jeanette. The over 55 provision wouldn’t have had near the impact that the 65% does.
February 19th, 2009 at 5:20 pm
Question we have is an employee was laid off 2/13/08 at which time we gave her the COBRA paperwork. This employee was eligible for FHIAP which reimbursed 90% of the cost of our medical and dental to this employee. Now that we are going to be required to turn around and give her NEW COBRA paperwork with this information on it, where will we get that form or the information so we can put it on an existing form?
Also, FHIAP has no clue as how this is going to work. Does the employer pay the 10% that FHIAP does not pay or do we now have to pay 65% and HOPE we get reimbursed?
Can you imagine the costs to employers who are already hurting or they wouldn’t be laying off their employees. Does this mean there will be more layoffs because more money is being re-directed to other areas than to actually running the business?
What an utter mess! I wish they would have went with the original bill.
Aaaarrrrrgggghhh!
February 19th, 2009 at 5:59 pm
I wouldn’t be surprised if the 65% (even though it is recouped through tax credits) and the administrative burden pushes some smaller employers over the edge to bankruptcy sooner!
I don’t see why they didn’t just put the $33 Billion dollars into the medicaid system, and then let everyone who is unemployed use that medical system. We adopted our daughter, and because of that, we are allowed to have her on medicaid. She has the same pediatrician as my two nephews. Medicaid (public health) is not what the public makes it out to be. Is there a reason that the $33B couldn’t have been used to subsidize monthly premium payments, or doctors fees, or administrative fees, or anything!
Why drag the employer through all of this. This is a huge burden on current systems, when employers are already short staffed and trying to keep expenses down.
February 19th, 2009 at 6:15 pm
Teri,
You mention she was laid off 2/13/08. I didn’t think the stimulus package reached back that far. I thought it was anyone who was laid off beginning 9/1/08 through 12/31/09. Was your date correct, or did I miss something for individuals who were on COBRA before 9/1/08?
This is quite a lot to navigate through, isn’t it!!
February 19th, 2009 at 6:37 pm
I’m sorry, I meant 02/13/2009. So she is eligible and we are scrambling to find out what we need to do and how much we need to contribute.
Thank you for your feedback.
February 19th, 2009 at 7:58 pm
The good news is, with all of the new COBRA laws and additional labor laws that are sure to get passed, there won’t be any HR people who don’t have enough to do. The more complicated they make it the more secure our jobs are. Maybe we’re part of the 65,000 jobs they said this stimulus bill would save huh?
February 19th, 2009 at 10:40 pm
I am sharing your confusion Teri. My company laid off nine people recently but we are a non-profit, so I am hoping there is an exemption. It hasn’t really been made clear at this point how this new law is supposed to administered.
February 20th, 2009 at 10:45 am
We hired an outside organization to administer our COBRA plan. We notify them of terminations and they do the rest. It cost $1.00 per employee per month, plus the 2%, and is the best money we have spent. The legal compliance rests on them, and the correspondence, and collection of premiums do as well.
February 20th, 2009 at 11:38 am
Christine, will your TPA pay the 65%? How will it be credited against your taxes? I think this might get a little more complicated for you (sadly!).
February 20th, 2009 at 2:53 pm
Am I correct in my understanding that those who voluntarily leave, or are terminated for cause, will not be eligible for this 65% subsidy?
February 20th, 2009 at 3:06 pm
Voluntary terms and those terminated for gross misconduct are not eligible for the 65% subsidy. If someone is termed for poor performance, that person is eligible.
February 20th, 2009 at 3:21 pm
Gross misconduct is very hard to prove. I offer COBRA under almost every circumstance.
February 23rd, 2009 at 9:14 am
Does anyone have an answer to this question? If an employee has a son or daughter on their health insurance plan, but that dependent loses coverage because they are no longer a full time student, will this new COBRA regulation cover them?
February 26th, 2009 at 3:20 pm
Jeanette we have until April 1st to notify any employees eligible. The Department of Labor, Treasury and the Department of Health and Human Services are working together to create a model notice within 30 days of the enactment date. I am waiting to see this model and get the notices out within the 30 days afterwards. It was great to see all these comments. This will be a lot of work.
February 26th, 2009 at 3:43 pm
I believe it only applies to someone with depedent coverage who is involuntarily terminated. If the employee still works there, the no-longer-covered dependant would just stay on COBRA at full cost, because their COBRA does not apply to an involuntary termination from employment.
Disclaimer: I have read a LOT of the info on this, but not the 424 pages or whatever of the entire bill, so who knows for sure!
February 26th, 2009 at 4:03 pm
I just learned Jackson-Lewis has a free webcast available for the next 60 days (JacksonLewis.com)
I’ve printed a bunch of information from many different sources, and have found each has presented the information in different ways, so it’s been a good way for me start to understand it (if that’s really possible!). I’ll listen to the webcast when I have an hour – I’m finding every piece of information helps. So, is everyone in HR ready for a career change?
February 26th, 2009 at 5:43 pm
Diane J., you mentioned April 1st as our notification deadline, however, I have received from two reliable sources (of many sources on this topic) that we have 60 days from the day the law went into effect, or until April 18, 2009, to notify eligible individuals of their right to the COBRA subsidy. If this is correct, we may have a couple of more weeks to prepare. I, too, have heard that the DOL is supposed have a model notice within 30 days from 2/17/09.
February 26th, 2009 at 7:30 pm
Has anyone seen any details for “what if’s?” We provide subsidized COBRA benefits for laid off workers based on years of service. We also have a self-insured plan. Will either of these issues negate our workers’ eligibility for the program?
February 27th, 2009 at 9:14 am
Can anyone tell me if you have seen clarification regarding the flexible spending accounts not being included? We offer health savings accounts and I cannot find clarification as to whether they are linking HSAs to the FSA exclusion or if my company will be affected by this amendment.
March 26th, 2009 at 10:13 am
My COBRA benefits began on September 1, 2008 although my layoff (involuntary termination) is dated August 15. Does anyone have an opinion on whether or not I’ll be eligible for the subsidy? Thanks!
March 27th, 2009 at 11:20 am
My take on this would be that you aren’t eligible. The eligibility is for involuntary loss of work starting on Sept. 1, 2008. It seems like you just missed being able to take advantage of this fabulous benefit for unemployed people.
March 27th, 2009 at 1:35 pm
Hi Gabby it was a typo on my part and yes it should be April 18th, sorry about that. Is anyone else having trouble figuring out which date to use for the 60 day period a past employee has to decide whether to choose COBRA.
March 30th, 2009 at 4:56 pm
Diane – As I understand it, they would have 60 days from the date you send the new notice.
April 24th, 2009 at 12:18 pm
Can someone explain the process for getting reimbursed for the 65% of the premium paid since Feb 2009 as provided for by the changes to COBRA via the Stimulus Bill?
April 26th, 2009 at 1:34 am
Has anybody actually gotten cobra coverage under the stimulus pkg? I lost my job 12/29/08 and was notified that i was eligible for the cobra stim in mid march. It took till mid april for the plan admin to get me the paperwork. I had to send a check with the paperwork to cover mar AND apr but my insurance card still has NOT been activated and therefore I still don’t have medical coverage. We are being made to pay from MAR 1 and I can’t even see a doctor!
April 28th, 2009 at 4:09 pm
Bobby – you will be able to claim a credit against your payroll taxes. Please see IRS.gov and search COBRA subsidy.