Stimulus COBRA

While the Consolidated Omnibus Budget Reconciliation Act (COBRA) has protected the health insurance eligibility of laid-off workers since 1985, the Stimulus COBRA – or, more specifically, the American Recovery and Reinvestment Act of 2009 - reduces monthly premiums for beneficiaries and allows some people who initially declined coverage to accept the coverage.

COBRA can help people retain health insurance temporarily.

Obtaining health insurance when not under the umbrella of an employer can be difficult and expensive. Individual health insurance is traditionally more costly than coverage obtained in a group. There may be additional restrictions for individual coverage and may also include higher copayments and other fees.

When an employee is laid off from a job, or a person divorces a spouse who supplied health insurance coverage through an employer's policy, COBRA is available to allow the person to retain the current health insurance coverage. This allows the person to keep the same coverage without a gap in coverage until another job can be found or the coverage runs out, which is either 18 or 36 months depending on the circumstances.

COBRA does not require that the unemployed worker is entitled to coverage at the same cost as when the worker was employed. Most people experience an increase in their monthly health insurance premiums because the employer no longer subsidizes the cost of the monthly premium.

This does not mean that COBRA coverage is not important and valuable, however. Retaining health insurance coverage through COBRA is usually less expensive than obtaining an individual health insurance policy from a new provider.

President Obama signed the American Recovery and Reinvestment Act (ARRA) in 2009. This Act, among other things, provides financial relief to struggling individuals and families. One of the aspects of ARRA includes a plan to ease the financial burden of people who are currently eligible for COBRA coverage.

The Act includes:

• A premium subsidy that reduces the cost of the coverage for eligible people. The reduction amount is 65 percent of the premiums the beneficiary currently pays. The reduction lasts for nine months.
• The opportunity for eligible beneficiaries who initially declined coverage to now elect coverage. The new coverage will include the reduced premiums. The time period involved for people who originally declined coverage is September 1, 2008 through February 16, 2009. People who declined coverage outside of these dates are not eligible to elect coverage under the Stimulus COBRA.

Not everyone is eligible for rate reductions and enrollment into coverage after initially declining under the Stimulus COBRA. Although rules and eligibility for this program vary, "in general" you are not eligible for the benefits set forth by the ARRA if any of the following apply to you:

• You are eligible for group coverage through another source, such as a new employer or through Medicare. This also applies to individuals who are eligible for group health coverage through a spouse's eligibility.
• You were fired from your job for gross misconduct instead of being laid off for other reasons beyond your control. This also may disqualify your dependents from coverage from COBRA as well as the additional Stimulus COBRA benefits.
• You did not participate in the group health coverage while you were employed.

Situations and eligibility vary, so don't assume that you are automatically eligible or ineligible without first checking to find out what category you actually fall into based on your particular situation. More information about eligibility can be found through the U.S. Department of Labor.

If you are ineligible for the benefits provided by the Stimulus COBRA, you may be eligible for reductions available to eligible beneficiaries as a result of the Health Coverage Tax Credit provided by The Trade Adjustment Assistance Health Coverage Improvement Act.

To find out if you are eligible for assistance through this program, check with the Internal Revenue Service or speak to a tax consultant.

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