Cobra Information
News Statement
Release Date: December 21, 2009
Contact Name: Gloria Della or Joseph De Wolk
Phone Number: 202.725.8422/202.579.4681
Statement of Phyllis C. Borzi on COBRA subsidy extension
(click here for PDF version of article)
Washington, DC – Phyllis C. Borzi, Assistant Secretary of the Employee Benefits Security Administration (EBSA) today released the following statement regarding the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the recent extension of the premium reduction under the American Recovery and Reinvestment Act (ARRA):
"I am pleased Congress has acted and the President has signed the Fiscal Year 2010 Defense Appropriations Act. The act extends the eligibility period for the COBRA premium reduction for an additional two months (through Feb. 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). Millions of unemployed Americans and their families will be better able to afford and keep their health benefit coverage because of this new law.
"Individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by (60 days after date of enactment) or, if later, 30 days after notice of the extension is provided by their plan administrator.
"We encourage you to subscribe to our COBRA Web site, www.dol.gov/cobra, to get information on new notice requirements, updated guidance, fact sheets, and frequently asked questions as they become available.
"Individuals should contact their plan or health insurance provider for information regarding the extension under their health plan. If you need further assistance contact an EBSA Benefits Advisor toll-free at 1-866-444-3272."
U.S. Department of Labor news releases are accessible on the Department's Newsroom page. The information in this news release will be made available in alternate format (large print, Braille, audio tape or disc) from the COAST office upon request. Please specify which news release when placing your request at 202.693.7828 or TTY 202.693.7755. The Labor Department is committed to providing America's employers and employees with easy access to understandable information on how to comply with its laws and regulations. For more information, please visit the Department's Compliance Assistance page.
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Visit the following website for more Cobra Subsidy information:
US Internal Revenue Service http://www.irs.gov/newsroom/article/0,,id=204505,00
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The President recently signed the American Recovery and Reinvestment Act into law.
Visit www.recovery.gov for more information
(TITLE III - Premium Assistance for Cobra Benefits - PDF version)
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U.S. Department of Labor
Health Plans & Benefits
Continuation of Health Coverage — COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.
COBRA outlines how employees and family members may elect continuation coverage. It also requires employers and plans to provide notice.
For more information http://www.dol.gov/dol/topic/health-plans/cobra.htm
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U.S. Department of Labor
Fact Sheet: COBRA Premium Reduction
PDF Version
U.S. Department of Labor http://www.dol.gov/ebsa/cobra.html
Employee Benefits Security Administration
February 26, 2009
The American Recovery and Reinvestment Act of 2009 (ARRA) provides for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months.
COBRA
COBRA gives workers who lose their jobs, and thus their health benefits, the right to purchase group health coverage provided by the plan under certain circumstances.
If the employer continues to offer a group health plan, the employee and his/her family can retain their group health coverage for up to 18 months by paying group rates. The COBRA premium may be higher than what the individual was paying while employed but generally the cost is lower than that for private, individual health insurance coverage.
The plan administrator must notify affected employees of their right to elect COBRA. The employee and his/her family each have 60 days to elect the COBRA coverage, otherwise they lose all rights to COBRA benefits.
Note: COBRA generally does not apply to plans sponsored by employers with less than 20 employees. Many States have similar requirements for small plans providing benefits through an insurance company. The premium reduction is available for plans covered by these State laws.
Changes Regarding COBRA Continuation Coverage Under ARRA
Premium Reduction: The premium reduction for COBRA continuation coverage is available to "assistance eligible individuals".
An "assistance eligible individual" is the employee or a member of his/her family who:
Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. There is no premium reduction for premiums paid for periods of coverage prior to February 17, 2009.
ARRA treats assistance eligible individuals who pay 35 percent of their COBRA premium as having paid the full amount. The premium reduction (65 percent of the full premium) is reimbursable to the employer, insurer or health plan as a credit against certain employment taxes. If the credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the employer, insurer or plan for the excess.
The premium reduction applies to periods of coverage beginning on or after February 17, 2009. A period of coverage is a month or shorter period for which the plan charges a COBRA premium. The premium reduction starts on March 1, 2009 for plans that charge for COBRA coverage on a calendar month basis. The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 9 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare.
Special COBRA Election Opportunity: Individuals involuntarily terminated from September 1, 2008 through February 16, 2009 who did not elect COBRA when it was first offered OR who did elect COBRA, but are no longer enrolled (for example because they were unable to continue paying the premium) have a new election opportunity. This election period begins on February 17, 2009 and ends 60 days after the plan provides the required notice. This special election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months from the employee's involuntary termination). COBRA coverage elected in this special election period begins with the first period of coverage beginning on or after February 17, 2009. This special election period opportunity does not apply to coverage sponsored by employers with less than 20 employees that is subject to State law.
Notice: Plan administrators must provide notice about the premium reduction to individuals who have a COBRA qualifying event during the period from September 1, 2008 through December 31, 2009. Plan administrators may provide notices separately or along with notices they provide following a COBRA qualifying event. This notice must go to all individuals, whether they have COBRA coverage or not, who had a qualifying event from September 1, 2008 through December 31, 2009.
Individuals eligible for the special COBRA election period described above also must receive a notice informing them of this opportunity. This notice must be provided within 60 days following February 17, 2009.
Expedited Review of Denials of Premium Reduction: Individuals who are denied treatment as assistance eligible individuals and thus are denied eligibility for the premium reduction (whether by their plan, employer or insurer) may request an expedited review of the denial by the U.S. Department of Labor. The Department must make a determination within 15 business days of receipt of a completed request for review. The Department is currently developing a process and an official application form that will be required to be completed for appeals.
Switching Benefit Options: If an employer offers additional coverage options to active employees, the employer may (but is not required to) allow assistance eligible individuals to switch the coverage options they had when they became eligible for COBRA. To retain eligibility for the ARRA premium reduction, the different coverage must have the same or lower premiums as the individual’s original coverage. The different coverage can not be coverage that provides only dental, vision, a health flexible spending account, or coverage for treatment that is furnished in an on-site facility maintained by the employer.
Income limits: If an individual’s modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium reduction during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium reduction that must be repaid is reduced proportionately. Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits. If you think that your income may exceed the amounts above, consult your tax preparer or contact the IRS at www.irs.gov.
This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; TTY: 202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.
U.S. Department of Labor http://www.dol.gov/ebsa/cobra.html
Frances Perkins Building
200 Constitution Avenue, NW
Washington, DC 20210 Toll-free Hotline: 1.866.444.EBSA
Text Telephone: 1.877.889.5627
Questions/Assistance
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Jerry Chautin
Let’s talk Business
Published: Monday, December 29, 2008 at 1:00 a.m.
Printed on page D8
Health insurance tied to jobs is vulnerable
Two years ago, Quentin Moses, a Georgia insurance agent, made a convincing argument for employees to buy individual health insurance policies rather than automatically accepting the group plans offered by their employers. His presentation was called, "How to avoid losing your health insurance when you leave your job."
Moses made his case to skeptical business counselors at the Atlanta SCORE chapter during a time when jobs were more secure and many employees were happy with their company's group insurance plans.
But with massive layoffs nationwide, employer insurance coverage is being lost and Moses' sage advice takes on more significance.
"The labor market shed a seasonally adjusted 533,000 net payroll jobs in November, the highest monthly loss since December 1974," says Bob Bach, chief economist for Grubb & Ellis. "Expect job losses to extend into the second half of 2009."
The reflex reaction for those losing their jobs is to accept COBRA, the acronym for Consolidated Omnibus Budget Reconciliation Act of 1985 for employers with 20 or more employees. It allows you to continue receiving health insurance through your former employer.
According to COBRAlearning.com, a Web site that promotes alternatives to COBRA, "COBRA can be very expensive because consumers often pay up to 102 percent of the premium that was partially covered by their employer." It claims that by shopping for individual policies and comparing rates, "consumers can potentially save up to 60 percent over COBRA premiums."
With unemployment increasing, insurance agent Bill Steffen, with Bradenton and Peoria, Ariz.-based Steffen Financial, launched ReplaceCOBRA.com. "The Web site targets the massive layoffs and company closures occurring in this recession," he says. It cites alternatives for "the thousands of people that will now need private health insurance."
Opinion Research Corporation conducted a survey for eHealthInsurance to ascertain how familiar people are with COBRA and its alternatives. Among the 1,004 adults surveyed, 4 in 10 adults knew little or nothing about COBRA and only 45 percent of respondents were aware that individually purchased health insurance can provide similar benefits to a COBRA plan.
If your job seems uncertain, do not wait to learn about your health insurance alternatives. Talk to your insurance agent, check out the previously mentioned sites and also the Department of Labor's frequently asked questions about COBRA at tinyurl.com/op5p.
What about President-elect Barack Obama's new health care plan?
"Obama's new plan for changes to health insurance will take years to implement," Steffen says.
Because your choices depend on your age and family situation, talk to several providers before committing.
Jerry Chautin is SBA’s 2006 “Journalist of the Year” and a local volunteer business counselor with Manasota SCORE, "Counselors to America's Small Business," offering free business advice. Contact him with your business questions and stories by e-mail at jkchautin@aol.com. SCORE's phone number is 941-955-1029 and its Web site is www.score-suncoast.org.
(PDF Article Version - Sarasota Herald Tribune)
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Bizology Now
By JERRY CHAUTIN
JKChautin@aol.com
Tuesday, January 6, 2009 8:05 PM CST
Unemployed workers fear losing health insurance
With Cherokee County’s unemployment rate approaching 10 percent, workers fear that they will lose their group health insurance if they are out of work. They are thinking about healthcare alternatives in case they lose their jobs.
Two years ago, Quentin Moses, a Georgia insurance agent, made a passionate case for employees to buy individual health insurance policies rather than automatically accepting the group plans offered by their employers. His presentation was called, “How to avoid losing your health insurance when you leave your job.”
Moses gave his presentation to skeptical business counselors at my Atlanta SCORE chapter during a time when jobs were more secure and many employees were happy with their company ’s group insurance plans. At the time it was tough for him to make the case that we should recommend that our small-business clients purchase individual policies instead of group insurance.
But with massive layoffs nationwide, employer-purchased group insurance coverage is being lost and Moses ’ sage advice takes on more significance.
“The labor market shed a seasonally adjusted 533,000 net payroll jobs in November, the highest monthly loss since December 1974,” says Bob Bach, chief economist for Grubb & Ellis. “Expect job losses to extend into the second half of 2009.”
The reflex reaction for those losing their jobs is to accept COBRA, the acronym for Consolidated Omnibus Budget Reconciliation Act of 1985 for employers with 20 or more employees. It allows employees to continue receiving health insurance through their former employer. But the employees will be responsible for the entire premium even if their employer previously contributed part of it.
According to COBRAlearning.com, a Web site that promotes alternatives to COBRA, “COBRA can be very expensive because consumers often pay up to 102 percent of the premium that was partially covered by their employer.” Its says that by shopping for individual policies and comparing rates, “consumers can potentially save up to 60 percent over COBRA premiums.”
With unemployment increasing, insurance agent Bill Steffen, owner of Bradenton, Fla. and Peoria, Ariz.-based Steffen Financial, launched ReplaceCOBRA.com. “The Web site targets the massive layoffs and company closures occurring in this recession,” he says. It cites alternatives for “the thousands of people that will now need private health insurance.”
Opinion Research Corporation conducted a survey for eHealthInsurance to ascertain how familiar people are with COBRA and its alternatives. Among the 1,004 adults surveyed, four in 10 adults knew little or nothing about COBRA and only 45 percent of respondents were aware that individually purchased health insurance can provide similar benefits to a COBRA plan.
If your job seems uncertain, do not wait to learn about your health insurance alternatives. Talk to your insurance agent. Ask what alternatives are available in North Carolina, including state-subsidized insurance for children. Check out the previously mentioned sites and also the Department of Labor ’s frequently asked questions about COBRA at tinyurl.com/op5p.
What about President-elect Barack Obama ’s new health-care plan?
“Obama’s new plan for changes to health insurance will take years to implement,” Steffen says. “Expect the children and Medicare programs to be the first items on the agenda.”
Meanwhile, you will have to make healthcare decisions based upon today ’s rules. And because your choices depend on your age and family situation, talk to several insurance providers before committing to a policy.
Jerry Chautin is SBA’s 2006 Small Business Journalist of the Year award winner. He’s a volunteer SCORE business counselor, writes about business and real estate, answers your questions and provides free business advice and mentoring. SCORE is a nonprofit resource partner of SBA. Its Web site is www.score.org. Send questions and story leads to: P.O. Box 254, Murphy, NC 28906 or e-mail: JKChautin@aol.com.
(PDF Article Version - Cherokee Scout)
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Business Week
October 8, 2009
Getting Health Insurance When You're Laid Off
(click here for pdf version of this article)
The government is giving jobless workers help with COBRA, but other plans may be better. Check carefully to see what's covered
By Aaron Pressman
In February the government gave people who lost their jobs in 2009 a big helping hand, agreeing to pay a portion of their COBRA health insurance premium. As part of the stimulus package, Washington is paying 65% of the cost for nine months under the program that lets people keep their health insurance when they leave a job. But eligibility for the subsidy expires at yearend, so those laid off in 2010 will be back to paying the entire cost of their COBRA policies unless Congress acts again.
Typically, employees pay about one-third or less of the cost of health-insurance premiums. So the price of COBRA, which covers the entire premium plus a 2% administrative fee, can be a shocker. Before the subsidy, relatively few people opted for it. A survey by benefits consulting firm Hewitt Associates (HEW) found only 19% of those eligible for COBRA from September 2008 through February 2009 paid for the coverage, vs. 38% opting for it over the four months, after the subsidy took effect. The cost for the average worker fell from $8,800 to about $3,000 annually with the subsidy, the survey found. The subsidy applies only to people who lose their jobs involuntarily.
Once the subsidy expires, COBRA may not be the smartest or most affordable option. "The subsidy put the cost of COBRA on par with the cost of employer-provided coverage," says Karen Frost, head of the health and welfare outsourcing business at Hewitt. "Historically, it has been more of a last resort."
There are numerous COBRA alternatives. Health-insurance offerings vary greatly by state, since they are mainly regulated at the state level. Careful shopping is required to determine which options are included in a policy if they are not mandated by state rules. And consumer advocates warn that some options, known as limited or fixed indemnity policies, don't offer good value.
The first step after losing a job is to evaluate the COBRA plan offered by your former employer. You have 60 days to decide whether to take it. Not all health-related benefits are covered under COBRA or the new subsidy program. The U.S. Labor Dept. has set up a Web site explaining in detail how the subsidy program works at dol.gov/ebsa/cobra.html.
Departing employees who had high-deductible plans combined with Health Reimbursement Arrangements face an added layer of complexity. The HRA is a set amount of money that can be used to cover deductibles or other health-care expenses not covered by the high-deductible policy. Unused money is usually rolled over to the next year. Under COBRA, a former employee would pay a premium for the high-deductible plan and another for the HRA, with both reduced by the 65% subsidy.
If, once the subsidy expires, COBRA is too pricey, state-government-run plans or comprehensive individual plans may be better options. Government-run plans are offered by most states; eligibility requirements vary widely. In Massachusetts, for example, a family of four with an income under $66,156 can opt for the state's Commonwealth Care plan. The premium for the lowest priced of six plan providers is $116 per adult per month. There are also co-pays.
Dozens of insurance companies sell individual plans, usually through a broker or agent. Although some general insurance agencies sell health plans, specialized health brokers may know more about the complexities of particular policies. Healthy people should be able to find an individual policy with good coverage at substantially lower cost than their former employer's COBRA plan, says Jon Moss, founder of Chattanooga-based Moss Benefits Group, who helps small businesses and individuals buy health insurance.
With varying state laws and without the bargaining power of employers, shopping for individual plans can seem a bit like the Wild West, says Eliza Bangit, senior research associate at the Georgetown University Health Policy Institute. To get started, Bangit suggests statehealthfacts.org, a site run by the nonprofit Henry J. Kaiser Family Foundation. It provides information about consumer protection, plan features required by each state, and links to government-run informational sites.
WHAT TO AVOID
Push insurers for a copy of the "Explanation of Benefits" (EOB), which is more detailed than the standard summary, Bangit says. "They'll say you can't have it until you sign up, but you need it to do your research, so insist on reviewing it," she says. Bangit recommends avoiding plans with an annual benefit cap. Lifetime benefit maximums of $1.5 million to $2 million are more common and less alarming, she says.
Comparing plans can be tricky for those with chronic conditions or in need of special care. Insurers aren't necessarily willing to say how much they'll reimburse for a procedure. Even when plans have a maximum out-of-pocket level, some drugs or procedures may be left out. State laws vary on whether insurers can exclude coverage because of preexisting conditions.
Non-employer-based group plans, known as association plans, may also be available. For example, the New York-based Freelancers Union offers a plan for members. To qualify, an individual must show he has freelanced for at least 20 paid hours in the previous eight weeks or earned $10,000 over the prior six months.
Scrutinize these kinds of offerings. Problems have arisen from confusion over plans that were really limited-benefit plans, not full-blown insurance coverage. The plans, often pitched on TV, partially mirror typical policies by charging a monthly fee and by having discounted prices for doctor visits, prescriptions, or other services. But they generally don't cover expenses such as surgery and hospital stays.
It's not just late-night TV pitchmen who offer confusing limited-coverage plans: Thousands of people bought what they thought was comprehensive insurance from programs licensed through AARP, which got caught up in the debate over limited plans last year.
Senator Charles Grassley (R-Iowa) accused AARP of licensing limited plans from UnitedHealth Group (UNH) under the misleading names "Essential Plus Health Insurance Plan" and "Essential Health Insurance Plan." Neither covered the huge expenses of those who became seriously ill. AARP suspended marketing the plans and in April said it was discontinuing them. "Ensuring the protection and keeping the trust of our members...drives all that we do," AARP CEO Barry Rand said then. In the health-insurance market, it's no easy task.
Pressman is a correspondent in BusinessWeek's Boston bureau.
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Jerry Chautin
Posted 11/23/2009
www.huffingtonpost.com
Health Care Debate Looms Large at Thanksgiving
(click here for PDF version of article)
Turkey, cranberry sauce, and a side of health care debate is dominating Thanksgiving tables this year. As such, my opening assertion is that government shall do what the governed are unable to do for themselves. Sure, the cost and how you get there are important. But unless every American who wants health insurance can get it, that is not my idea of health reform.
Consequently the Republicans' attempt to offer an alternative is unacceptable because it would extend insurance coverage to only 3 million more people within the next nine years. That leaves 52 million people without insurance, according to the Congressional Budget Office. By contrast, the Democrat’s bill covers 30 million. Furthermore, I am for the government option unless either party shows me an alternative to cover everyone who wants to purchase insurance.
But the debate gets more heated when individuals and groups worry that their situation will be adversely affected and covering everyone is not their goal.
"The entire reform is pure wealth redistribution, cost shifting, higher passed through taxes, and does nothing to bring down costs except for price controls and intervention," Bill Steffen says. "You can't insure 40 million more people, provide free preventative care, including $1,500 colonoscopies, cover all preexisting conditions, no lifetime maximum, low deductibles and have it all paid for and budget-deficit neutral."
Steffen is an independent health insurance agent in Florida and Arizona and says that his business will suffer as a result of the proposed health care legislation. He believes that the need for an independent agent will be diminished if the government gets involved. "The role of the agent might be eliminated if it turns into the federal health benefits plan where they choose off a large menu of options with a handbook."
Understandably, businesspersons that believe their livelihood will be adversely affected are worried.
But if you have preexisting conditions and are unable to buy health insurance, you are applauding President Barack Obama's initiative to prevent insurance companies from denying you coverage. If you meet the lower income requirements to receive federal subsidies, you are happy that the insurance will be more affordable.
"There is also a belief among many, that access to healthcare is an entitlement to every citizen and it is the federal government’s responsibility to make it available to everyone," Barney Bishop says. "I think not."
He is CEO of Associated Industries of Florida, a nonprofit that represents a diversified membership of Florida’s business owners in government matters that affect them. Bishop says that this bill will be a "jobs-killer" for small businesses. "There is simply too much big government in this proposal," he says. "This could look like catastrophic insurance for the chronically uninsured with heavily subsidized premiums to see if the feds could really handle this large population."
Meanwhile, AARP endorsed the House healthcare reform bill on November 5. On November 21, the Senate got the 60 Democratic votes needed for the full Senate to debate its bill. Presumably AARP will also stand behind the Senate version if Harry Reid, the Senate majority leader, can keep his party in lockstep to pass it. The ultimate test will be reconciling the House and Senate version for Obama to sign into law.
AARP has 40 million members that are 50 years or older. It joins the American Medical Association, Consumers Union, the American College of Physicians and other groups that support Obama’s healthcare reform.
AARP established an online community to update interested persons about the status of healthcare reform, debunk myths and voice their opinions.
AIF’s Bishop says, "Ideally, you'd want to cover everyone, but then you get into the Gordian knot of (illegal) immigrants and everything that goes along with that." In other words, he believes that the bill has complex and clouded provisions to cover illegal immigrants with undesirable consequences.
Insurance agent Steffen hopes that the final legislation will be kinder to his business than what he sees so far. If not, he may use his expertise to market his industry knowledge instead of selling insurance. "I'll figure out a way to be the health reform consultant and get paid," he says.
Jerry Chautin is a volunteer SCORE business counselor, business columnist and SBA’s 2006 national "Journalist of the Year" award winner. He is a former entrepreneur, commercial mortgage banker and business lender.
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