The Stimulus Bill and COBRA Benefits: How the COBRA Premium Subsidy will Help More Get COBRA Benefits

By Bobbie Sage,

The American Recovery and Reinvestment Act, signed into law by President Obama on February 17, 2009, is a $787 billion stimulus bill. One of the many provisions of the bill is to directly provide relief to millions on the COBRA plan or ex-employees who need COBRA coverage. This “COBRA stimulus plan” will provide enrollees a COBRA premium subsidy along with providing COBRA benefits to ex-employees who denied coverage.

First, Let’s Look at What COBRA Is

Before we learn more about the COBRA stimulus plan, let’s start with explaining a bit about COBRA. The Consolidated Omnibus Budget Reconciliation Act, otherwise known as COBRA, was put into law in 1985 to help workers who lost their job continue their health insurance. Basically, it gave the ex-employee the ability to continue their employer sponsored health insurance plan. The insurance stayed the same but the entire premium was to be paid by the ex-employee.

The First Part of The COBRA Stimulus Plan: Reduced Premiums

The COBRA stimulus plan basically has two parts. In the first part, The COBRA stimulus plan will be able to step in and help struggling families trying to pay their COBRA benefits. People who are currently enrolled in the COBRA plan will get a 65% reduction in their premium costs. This will be a huge savings to many families struggling to keep their COBRA benefits.

Part 2: The Ability to Re-Enroll into COBRA

The second part of the COBRA stimulus plan will provide recently unemployed people the ability to re-enroll into the COBRA plan, even if they had denied coverage in the past. This will help a great amount of people who choose not to continue their health insurance through COBRA because they just could not afford it.

9 Key Details about the COBRA Stimulus Plan

1. Valid for people who were involuntarily terminated between September 1, 2008 and December 31, 2009

2. To be eligible annual income cannot exceed $125,000 for a single person and $250,000 for a couples

3. 65% of existing COBRA premiums will be subsidized by the U.S. Treasury Department

4. Subsidies will be available for up to 9 months

5. If you declined COBRA coverage after September 1, 2008 you will have the option to re-enroll into COBRA with the above subsides

6. Notices of the COBRA subsidies and re-enrollment information will be sent from the COBRA administrator (usually your previous employer)

7. Subsidies will be paid, via a refundable tax credit, directly to the COBRA administrators

8. Subsidies will terminate if the enrollee acquires a new health insurance plan through another employer or is eligible for Medicare

9. 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


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