Economic Stimulus Plan - COBRA Changes
Category: 2009 Stimulus
Topics: bill, stimulus, traviscobra, webcobra
This morning, the US House of Representatives is going to vote on the President’s Economic Stimulus Plan. The Plan has a substantial impact on COBRA, and if passed, we’ll be ready for it.
We will be updating both TravisCobra and WebCOBRA as soon as the law is enacted, and are preparing for the bill right now.
Last Update: 2/17/2009
You can view the PDF version of the House bill—go to page 365 and you’ll see the “Health Insurance Assistance for the Unemployed Act of 2009”.
As we know, the language of the bill can change and the US Senate could pass a different version of the bill, but this seems to be the first concrete version of the law that you can peruse.
We’ll be parsing this over the next few days and will post our finalized plan, but here are the highlights as we see them:
- For 12 months after the law is enacted, COBRA premiums from ‘eligible participants’ will be treated as paid in full if the QB pays 35% of the premium. COBRA period does not get extended on prior events
- Eligible participants will be those who were able to enroll in COBRA at any time between September 1, 2008 and December 31, 2009
- The COBRA event must have been ‘involuntary termination of employment’ during that time
- Administrators will need to notify eligible participants within 60 days of the bill’s enactment
- Employers will take the 65% reduction in premium as a credit against payroll taxes. If the reductions are more than the payroll taxes due, the government will send a check to the employers
- Employers will be required to report to the IRS an statement of the involuntary termination, and a statement of the premium reductions during the period, and will be delivered to the IRS at the same time as payroll taxes
We will post updates to the blog if the bill changes our outlook.
Update 11-29-2009: The Bill, HR 1, passed the House last night 244-188:. The Senate will now take up the measure. WSJ coverage. If you want to delve even into more details, you can view the cost projections of the bill.
Update 02-02-2009: The Senate convenes today at 2:00 PM PST to discuss the bill, H.R.1. GOP Leaders express doubt it will pass and want it sliced down. The Democratic Party, however, only needs 3 Republicans to cross party lines and vote for the measure. We should mention the House had 0 Republican votes for HR1.
Update 02-10-2009: The Senate passed the stimulus bill today with a vote of 61-37 (Vote Role-Call). You can view the Senate’s version of the bill, with amendments (view the 5th version of the bill ) We’ll post an update summarizing our outlook on the bill’s future and our plans shortly.
Update 02-11-2009: We’ve published both a legislative timeline (President Obama wants to sign on President’s Day), and a comparison of House and Senate Bills.
Update 02-11-2009: Reports are coming in that the conference committee between the House and Senate have reached a deal. “The differences between the House and Senate versions, we’ve resolved,” Senator Harry Reid of Nevada, the Democratic majority leader, said in a Capitol news conference.
Update 02-12-2009: The AP reports that congressional leaders will unveil the stimulus compromise today (Thursday). One highlight of the article reads, “The Obama plan offers a 60 percent subsidy to help unemployed people pay health insurance premiums under the COBRA program.” From this, we can assume the COBRA changes made it in the conference bill, and they House and Senate compromised on a 60% subsidy (House was 65%, Senate was 50%).
Update 02-13-2009: The conference report has been released. View the COBRA implications in the 2009 Stimulus Bill. The final subsidy percentage is 65%, but only for 9 months.
Update 02-14-2009: Both Houses of Congress passed the 2009 Stimulus Bill. Read about the vote and the changes to WebCOBRA and TravisCobra.
Update 02-17-2009: We’ve posted our plan regarding both system and published guidance on what Administrators can begin to do to prepare for the 2009 COBRA changes. Read more at TravisCobra and WebCOBRA changes. We’re also going to close comments here on this post. Please ask questions over here.
48 Responses to “Economic Stimulus Plan - COBRA Changes”
Comments are closed for this article.
February 6th, 2009 at 01:17 PM
I just noticed this was closed for commenting and re-opened it. We’re interested in your thoughts on how this impacts COBRA.
February 11th, 2009 at 10:15 AM
If an employer has employees who were laid off on August 15, 2008 and started COBRA coverage on Sept 1, 2008- ARE they covered for the subsidy under the current COBRA subsidy?
Thanks
February 11th, 2009 at 11:30 AM
For QB’s that are eligible for this susidy and have enrolled, are we going to have to refund them past payments already made back to their start date?
February 11th, 2009 at 12:35 PM
@John – It appears the event needs to be on/after Sept 1, 2008. That could change, but it appears (in my opinion) that no, those events would not be covered.
@Adella – In the Senate bill it says the Premium Reduction will take place on the 1st of the month following the enactment, most likely March 1st. If that doesn’t change then no, it would most likely start for 3/1/2009 premiums and last for 1 year.
February 11th, 2009 at 04:41 PM
What would be your read on this scenario… I’ll ask the key Question first, which is related to the timing of when the law goes into affect (presumably 3/1/09),...if an employee’s election rights Expire on 3/1/09 (Sunday)...and they allow the date to pass without electing, does the new law allow that employee to then elect after 3/1/09 and receive coverage? Secondly…in that scenario, since the employee elected after the law became effective, do they have to pay the premiums back to the date the benefits terminated?
In other words, an employee in this situation could let the new law date of 3/1 pass(which is also when their right to elect expires), then be offered coverage under the new law…elect it….and only have to pay premiums going forward. Am I understanding this right?
Employee’s last official day is Dec. 1, 2008, the employer provided benefits through 12/31/08. (Benefits Termination date 12/31/08). Election rights expire 3/1/09.
February 12th, 2009 at 08:35 AM
@CB – Under both versions of the bill, there is an “extended election period.” In my opinion, after re-notifying the QB, they will have 60 days of additional election time.
However, their coverage will go back to the event date like the current election period does.
Given that, in your case, you’d notify the QB on/about 3/1/2009 of their possible premium reduction. They would have to pay full premiums for 1/1/09 through 2/28/2009, and then would have the premium reduction for 12 months after that.
Qualifier: This all depends on if the bill changes in the conference committee—it could change completely!
February 12th, 2009 at 10:09 AM
It seems reprehensible that NOT all of the current people on COBRA will qualify for the subsidy. Perhaps that will change, but what were they thinking? There should not a hard qualifying event data of September 1, 2008. What about all of the people laid off this past summer??
February 12th, 2009 at 10:48 AM
Kevin,
It’s my understanding that any former employee who is paying full COBRA premiums when the law is enacted will also be entitled to the subsidy. The employer will be required to refund the excess (retroactive to the enactment date) or provide a credit in future premium payments for the overpayment (to be made up within 6 months). Of course, these reimbursements or credits will also be entitled to the employer tax credit provisions.
February 12th, 2009 at 11:23 AM
@Kevin and @Susan—I think we’ll need to wait and see the final language in the bill to determine if existing COBRA participants who are on COBRA as of 9/1/2008 (due to involuntary termination) will be eligible for the subsidy.
It seems clear in the law that the qualifying event must be in the period. Both bills have the following language. In the Senate Bill it is Section 3001 defining “Assistance Eligible Individual” (paragraph C)
February 12th, 2009 at 03:36 PM
It is was good to see that the final version of President Obama’s economic stimulus package retained health care benefits for the millions of workers facing a prolonged period of unemployment. It is critical that workers and their families are given support as they search for the few new jobs.
February 13th, 2009 at 10:50 AM
We posted an update on the COBRA implications in the published committee bill. Expect it to pass the House and Senate today, and President Obama to sign in Monday.
Quick Overview: - 65% subsidy, but for 9 months - Eligible Participants who did not enroll in COBRA can re-enroll with a 60 day window as of 3/1/2009 and any gap in coverage does not count toward HIPAA pre-existing conditions.
February 13th, 2009 at 12:23 PM
Jesse,
My company laid off many people in August of 2008 and some started COBRA on September 1, 2008. Are they eligible for the subsidy?
John K.
February 13th, 2009 at 12:42 PM
@John – please see my reply on this thread.
February 13th, 2009 at 01:02 PM
Will this affect dependents of an active employee who no longer qualify for the insurance?
February 13th, 2009 at 01:46 PM
@Karen—If we operate under the assumption that dependents can continue under COBRA with the same rights as the former employee, and the former employee’s qualifying event was after 9/1/2008, then in my opinion probably. They could be eligible to enroll in COBRA as of 3/1/2009 under the new notification guidelines (as long as the former employee’s termination was not voluntary).
February 13th, 2009 at 02:29 PM
Involuntary terminations – means people who were fired for performance or discharged in any way as well as layoffs?
February 13th, 2009 at 02:36 PM
@Susan—correct, although I would still say that terminations ‘with gross misconduct’ would still make the event a non-qualifying event (even though they were involuntary).
So the Event still had to have been a qualifying COBRA event, but to get the subsidy and/or a new notification window, it also had to be an involuntary termination within 9/1/2008 to 3/1/2009.
February 13th, 2009 at 03:36 PM
So Jesse – In reference to my post earlier,...with regard to the employee and whether they would have to pay premiums back to 1/1/09…..
HIPAA: The Gap in coverage between the event date and the start of new coverage shall be “disregarded for purposes of determining the 63-day periods.”
...does this change anything…..assuming they don’t elect now, but elect during the bill’s extension period? They would still have to pay back to Jan. 1st?
February 13th, 2009 at 04:36 PM
@CB I think the recent changes do change that yes
-Administrators will need to notify eligible participants that they have a new right to enroll, and that’ll start 3-1-2009.So given that, the QB will start paying 3-1-2009… of course, the QB won’t be covered under insurance until 3-1 either.
It’ll be like the QBs had a new qualifying event that’ll start a 60 day windows effective 3/1. Their 18 month period still starts on the original event date though.
February 14th, 2009 at 11:47 AM
I have four questions: 1) Do I understand that the COBRA rate cannot change, even if the group had a renewal in the interim (since 9/1/08)? 2) Does this apply ONLY to medical coverage? They could not elect dental and/or vision if beyond their original 60-day election period. Nor would the employer subsidize for those benefits? 3) I saw where HRAs plan would not be included. Does this mean only the HRA increment but they could still elect the underlying HDHP? 4) What happens with those individuals who have already elected COBRA since 9/1/08 and already dropped it due to non-pay, went back to work, got new insurance/Medicare? Do they get a chance to elect for a second time?
February 14th, 2009 at 01:18 PM
@Rose—I’ll try my best here
1 – If you’re referring to the 90 day coverage change opportunity, then the rate of the plan the QB wants to change to could not have increased.
2 – The government will not be subsidizing dental/vision plans, that much is known. In my opinion, a QB would be able to enroll in a medical plan and a dental plan with the re-notification (and just not get a subsidy on the dental plan). That could change, but it’s how I see it right now.
3 – It would appear you are correct
4 – It doesn’t appear those indidivuals can re-elect. The law said that eligible participants who not did previously elect COBRA could re-elect. Your example would have already exercised their right to elect COBRA.
February 14th, 2009 at 07:13 PM
Hi . I waid laid off on Jan. 30th and just received my Cobra paperwork in the mail for my son and I. We both have pre-exisitng conditions and had dental offered to us as well. Our cobra was offered one price for myself and then and additonal price to my son. Both outragous. Much more than unemployment. Then the cost of dental was offered seperatly for each of us as well. I was told I have 60 days to get back to them. If I choose cobra to have started in Feb. to save all my receipts.
Would the 65% apply to us for both dental and medical or just medical? Medical alone is close to $800.00 a month. I was going to try and get my son Healthy NY but since he has Asthma I don;t even know if they’ll take him.
What do you think I should do? Thanks, Robyn
February 15th, 2009 at 08:30 AM
@Robyn—I wish I could give you advice, but we can’t do that (there’s too much information we just don’t know)... But we can talk about the law.
The 65% subsidy will most likely only apply to the medical premiums, but not the dental.
Administrators will be re-notifying participants of COBRA at the lower subsidized rate in the next 60 days with coverage starting 3/1/2009. If you enroll under the 3/1/2009 start-date, you won’t be covered for medical expenses between the event date and the COBRA enroll date.
Finally, the law says that coverage “lapses” (such as the hypothetical February lapse) due to a COBRA re-enroll from 9-1-2008 to 3-1-2008 should not be used for pre-existing conditions.
February 15th, 2009 at 01:07 PM
What happens if the plan no longer exsists that was orignally offered at the time of termination. We are currenly changing vendors for 3-1-09, would we still need to offer cobra to the non commenced qb’s
February 15th, 2009 at 01:13 PM
@cathy—I don’t see the law changing this aspect at all. If you would have normally been required to transfer COBRA participants to your new plan as of 3-1-2009, you will, in my opinion, need to notify QBs of the right to re-enroll. It could be immaterial that the plan is a new plan.
February 15th, 2009 at 08:52 PM
I’m a little upset about the timeline for help on Cobra. I was laid off June 30, 2008 and am not eligible for the plan. My payment is $525.00 per month. It would seem to me that everyone who was laid off in 2008 should have the option of this benefit. That’s when the major layoffs began. Paying my healthcare at this rate is really difficult in this economy. Any break would be appreciated!
February 16th, 2009 at 04:28 AM
What will happen for those still in their 60 day Election Period? If I send out a COBRA QE notice today for someone whose COBRA will start 2/1/09, would they get the option of paying for February at the full cost and then the 35% as of 3/1/09? Or could they decide to forego coverage for February (even tho it would count against their 18 months) and just start COBRA 3/1/09 at the 35% rate?
February 16th, 2009 at 07:07 AM
I am a COBRA administrator and am wondering about the logistics of the 65% / 35%. 1) Will the QB only be paying 35% of the total premium to the administrator or will the QB be paying the full COBRA rate and being reimbursed? 2) If the QB only pays 35%, who is paying the other 65% and to whom? 3) If the 65% is being handled through the employer tax breaks, can I assume that as an administrator, we will only be collecting the 2% COBRA admin fee on 35% of the total premium for those that are affected?
February 16th, 2009 at 08:03 AM
@Rose – I like to think of it as two COBRA events—your 2/1/09 QB could start as of 2/1/09 and pay full February and Subsidized March, or could enroll 3/1/09 and pay only subsidized rates for 9 months.
@Jim – The idea is that the QB will pay the 35% to the administrator. The employer pays the 65% to the insurance carrier and claims that 65% as a credit against their next payroll taxes. And finally yes, the QB will pay the 35% premium and the 2% admin fee (against the full premium). The law didn’t specify any changes to the administration fee, so its business as usual there.
February 16th, 2009 at 10:14 AM
Jesse, It is my understanding that DOL/IRS have 30 days to publish the rules regarding notice requirements under the COBRA portion of the bill. Is it the intention of Travis to incorporate those changes and provide code update to facilitate the change requirements within the 60 day period or are we going to be in manual mode as a result of the Stimulus Bill?
Mike
February 16th, 2009 at 11:57 AM
@Mike—You’re right, the law specifies that the Secretaries of Labor/Treasury must come out with rules and sample guidelines within 30 days about the notification requirement.
If they do meet that deadline, we will absolutely be modifying the system if needed. We’ll also change the default notices (and allow you to do the same) when the model notices change.
February 16th, 2009 at 12:13 PM
I was laid off in July and this seems to discriminate against me. Am I wrong? or did the policians screw this up once again with cutoffs. We are the ones struggling to pay the COBRA and have been since mid summer. Geeeeeeeeeesssssssssssshhhhhhhhhhhhhhhh.
Tom K- Potentially upset in California
February 16th, 2009 at 03:37 PM
So healthy people that have been laid off who normally bought private coverage at half the price of COBRA will now be staying on Cobra and wasting the taxpayers money because it is now subsidized. They should have made these people apply for individual coverage(much like HIPPA regulations)and get declined before the government will pay their portion of COBRA.Waste,waste,waste… They could have made a proposal which would allow the individuals to subsidize their private coverage would save the government billions.
February 16th, 2009 at 08:45 PM
Brian, I’m not sure where you get your numbers. I lost my job, and COBRA for medical and dental for my family works out to $1552/mo. My wife and I scoured insurance providers during the two months my company was continuing my pay and benefits, before electing to start COBRA. Nobody could touch anything like the same coverage. For medical only (dental not included) nobody was less than $2000/mo for comparable coverage. Key word: comparable.
Sure there were plans for far less than COBRA costs… if we don’t want prescription coverage, can live with insanely high co-pays, deductibles, etc. Take every aspect of my health coverage as it is now and strip it down to near nothing, multiplying our out of pocket costs like crazy and yeah, I could get “coverage” for less than COBRA costs. I just have to include the ”” around “coverage” to agree with you on any level. And we are healthy people.
February 16th, 2009 at 09:28 PM
Is their any possibility that workers (2.5 M +) who lost their job between 1/1/08 and 08/31/08 will be eligible for a subsidy ?
February 17th, 2009 at 07:18 AM
I received 6 months of severance pay from April 2008 – Oct 2008 which ended in Oct 2008. I’ve been receiving unemployment benefits since then and have had to pick up Cobra Insurance. A question, will I be able to receive the 65% assistance for Cobra payments in the stimulus bill. This would help greatly since I had to pay about $5,000 in January 2009 (to pick up family coverage from 11/01/08 through 02/28/09).
February 17th, 2009 at 07:37 AM
If a person were to have their COBRA begin 12/1/09, then would they have nine months of subsidy, or through 8/31/10?
February 17th, 2009 at 08:22 AM
@Ken – it appears that the answer is no, no government subsidy unless the event is after 9/1/2008
@Jim – it depends on when your qualifying event was. If it was after 9/1/2008, then your coverage could qualify, but if not then no
@Maxine – Under the current bill, only March through December are eligible for the government subsidy. We may see Congress try to extend the subsidy at that point.
February 17th, 2009 at 08:29 AM
I’M 67 YEARS OLD, A NURSE FOR 30 PLUS YEARS. MY FMLA LEAVE ENDED NOVEMBER 11,2008 D/T MEDICAL REASONS. I WAS NOT RELEASED TO RETURN TO WORK UNTIL LATE JANUARY 2008. I LOST ALL BENEFITS ON JANUARY 31ST,2009. MY COBRA PREMIUMS WOULD BE $517.00 PER MONTH. WILL I BE ELGIBLE UNDER THE NEW STIMULUS PLAN. UNFORTUNATELY MY JOB NO LONGER EXIST AND MY INCOME IS EXTREMELY LIMETED WITH SOC.SECURITY. THOUGH I HAVE MEDICARE, EVEN A SUPPLEMENT DOESN’T HELP ME WITH MEDICINES AND MEDICARE-D IS REALLY NOT THAT GRAT,SO I’M BETTER OFF WITH COBRA IF I CAN GET IT AT A LOWER PREMIUM.
February 17th, 2009 at 09:16 AM
I was laid off 04/2008 but my insurance was in effect untill 09/30/2008. I started COBRA 10/2008. Will I be eligable for the 65% assistance for COBRA payments?
February 17th, 2009 at 09:22 AM
@Patricia you’ll need to check with your administrator, but COBRA typically stops when you’re eligible for Medicare
@Kim as long as you’re still on COBRA as of 3/1, you should see the reduction. I can’t say for certain though since there are many factors that go into that.
February 17th, 2009 at 09:45 AM
I lost my job in Nov. 2008 and my COBRA was dropped in Jan. 2009 due to lack of payment. Called my previous company said they can reinstate my COBRA as of today for $2,600 for missed payments in Jan. and Feb. If I elect not to pay my miss payments and wait until 3/1/2009 will I get COBRA at a reduce rate and not worry about the $2,600? I know I would be taking a chance without insurance for the next 12 days. But if I can save $2,600 I might take the risk.
February 17th, 2009 at 10:19 AM
We are a 3rd party administrator of COBRA and have a question regarding how the stimulus bill will affect severance packages. We have many client employers who have let employees go or who will be letting employees go in the near future. If an employee accepts a, for example, 3 month severance package from their employer does that preclude them from being eligible for the stimulus package provisions? We have a large group of employees that are going to be laid off from one of our clients on 4/1/09. These employees will have 3 months of their COBRA premium paid per a severance agreement. If they accept the severance agreement of 3 most does this mean that they are not eligible for the stimulus package as they accepted a severance package instead? We have another large client that had a layoff on 11/1/08 and another on 12/1/08 with a two month COBRA premium payment as part of the severance. Same question applies; the dates are in line with the stimulus provision but does the fact that they accepted a severance package including payment of the COBRA premium mean they cannot continue with the 35% payment option? Thank you.
February 17th, 2009 at 10:26 AM
Hi, I am an administrator and was wondering if Travis will update the 35% to reflect in notices and COBRA letters or if we have to figure what everyone is paying each month.
February 17th, 2009 at 10:56 AM
@Justina: Travis will update the letters, enrollment forms, and premium computation forms to reflect the government subsidy. Coupons and Premium Bills will also be updated.
@Lisa: We plan to setup the system to take the government subsidy first. If you have a $1000 premium, the government will pay $650 of it. It gets complicated if the employer has a 50% subsidy. We plan to say that in that caseFebruary 17th, 2009 at 12:24 PM
My husband was laid off Jan. 23rd…We are both eligible for cobra…he is on medicare and doesn’t need cobra…but I will be applying for cobra…I don’t work…will I be covered under the stimulus plan to have 65 % of the cost paid as a spouse?
February 17th, 2009 at 02:18 PM
The new COBRA subsidy is NOT Fair to people laid off before September 1, 2008!
Perhaps the Senate will change this, or it can be interpreted differently?
February 17th, 2009 at 02:54 PM
@carolyn: that’s hard to say, but if you are able to be covered under your husband’s medicare, I think it would be doubtful that you would be eligible for the subsidy.
To everyone, including Andy, who is frustrated at the restrictions, you can give the WhiteHouse feedback on the COBRA provisions.