The Stimulus Plan of 2009 and COBRA

The world’s economy is in a global recession and many Americans are finding themselves out of work. For those who are out of work and were part of an employer-based health insurance plan, this means either losing health insurance coverage – not a good option in any circumstance – or participating in the government’s Consolidated Omnibus Budget Reconciliation Act, also known as COBRA.

A problem with COBRA is although you can keep your health insurance for a limited time while out of work, you do end up paying the entire premium. A health insurance premium that your employer most likely contributed to as part of your compensation. Under these conditions COBRA is a less than ideal solution because not only are you out of work, but your health insurance premiums under COBRA most likely just went way up in cost each month.

The recent stimulus package passed by Congress, known as the American Recovery and Reinvestment Act of 2009 (ARRA) created a premium reduction and additional election opportunities under COBRA for the recently unemployed.

About this provision of ARRA, Alan D. Lebowitz, deputy assistant secretary of labor for the department’s Employee Benefits Security Administration (EBSA) says, “Our action today gives workers and their families useful information on their right to receive the COBRA subsidy and makes it easier for employers and plans to meet their notice obligations. Given the current economic situation facing dislocated workers and their families, it is very important that individuals do not lose their group health coverage.”

You can find out more about ARRA and COBRA at the Department of Labor’s website.

The following information is taken from the DOL’s news release on ARRA, COBRA and health insurance for the recently unemployed:

The department has developed four notice packages tailored to fit different types of plans and individuals:

1. A general notice to be given to qualified beneficiaries covered by plans subject to the federal COBRA at the initial COBRA election opportunity.
2. An abbreviated general notice, which may be furnished to individuals who elected and are still covered by COBRA.
3. An alternative notice to be sent by issuers of group health insurance coverage subject to state continuation coverage laws.
4. A notice of extended election periods for eligible individuals who declined or discontinued COBRA coverage.

Each package contains a summary of the premium reduction provisions, questions and answers, and forms to use in requesting the premium reduction (and COBRA coverage, if not already enrolled).

Under COBRA, most group health plans must give employees and their families the opportunity to temporarily continue their group health coverage when coverage would otherwise be lost for reasons such as termination of employment, divorce or death.

The four model notice packages are available for download from EBSA’s dedicated Web page at http://www.dol.gov/ebsa/cobra.html. The Web page also contains additional frequently asked questions to help dislocated workers, their families and their employers understand the requirements.