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Many Do Not Realize They Qualify For COBRA Discount

By CityTownInfo.com Staff
August 11, 2009

Workers laid off after September 1, 2008, may qualify for a 65 percent discount on The Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefits. Unfortunately, many people do not know that the discount exists, or have been given false information that they are ineligible.

COBRA allows laid-off workers to pay their full monthly health insurance premiums plus an administrative fee for up to 18 months, thereby maintaining their health coverage. The cost can be high, and is often too expensive for many out-of-work people to afford.

But under President Obama's American Recovery and Reinvestment Act, those opting for COBRA can receive a 65 percent discount on the premiums for up to nine months. The Pittsburgh Post-Gazette reported in April that the subsidy was expected to save an average of $325 per month for individuals and $715 per month for families for health insurance costs.

Yet many laid-off employees have no idea that the discount exists, and human resource departments continue to be misinformed about the program. "The subsidy became effective immediately," explained Karen McLeese, vice president of employee benefit regulatory affairs for CBIZ Benefits & Insurance Services, who was quoted by MSNBC.com, "and gave HR departments no time to know it had passed, much less get up to speed on it."

It's unclear how many jobless have signed up for COBRA since the law took effect, and the Internal Revenue Service expects to release numbers in September indicating how many people have take advantage of COBRA since the discount was implemented. Yet it appears that many are misinformed about the subsidy.

The Pittsburgh Post-Gazette reported that many employers were not notifying former employees of their eligibility, even though companies were required to send notification no later than April 18. And MSNBC reports that of the almost 6,500 jobless who appealed to the Department of Labor because their former employers denied the subsidy, 75 percent of the cases were overturned.

In order to qualify for the discount, former employees must have worked for an employer with at least 20 employees, and been laid off between September 1, 2008 and December 31, 2009. Those who qualify for Medicare or a spouse's health insurance plan are ineligible, as are those who lost their jobs because of "gross misconduct." Additionally, the subsidy could increase tax liability to those earning more than $125,000 annually, or $250,000 for married couples.

MSNBC notes that it may not be too late for those who declined COBRA or canceled their insurance because it was too expensive, and encourages laid-off employees to check with their human resource department and COBRA plan administrator.

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