COBRA aid for layoffs is confusing

COBRA health insurance always had one big problem: cost.

The Consolidated Omnibus Budget Reconciliation Act has allowed workers leaving their jobs to continue their employer health coverage for up to 18 months. But they had to pay the company’s share of the health insurance premium as well as their own — up to 102 percent of the total cost. The price could run to more than $12,000 a year for family coverage.

So only a small fraction of eligible individuals took COBRA — often people who had a medical condition or had a family member with a one.

But with layoffs spreading, the federal stimulus package has offered $25 billion of COBRA aid to help prevent terminated workers from losing health coverage.

The legislation allows a worker involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009, to be eligible for a subsidy in paying for COBRA. With the subsidy, the worker has to pay 35 percent of the normal overall premium, with the government picking up 65 percent. The subsidy lasts for up to nine months.

Workers whose income is less than $250,000 (for joint-return tax filers) or $125,000 (for other filers) can receive the full subsidy. Those at slightly higher incomes may be eligible for part of the subsidy. People who turned down COBRA when first offered will get a second chance to enroll. But the subsidy doesn’t extend to people who are eligible for Medicare, a new employer’s health insurance plan or a spouse’s plan.

The COBRA change is expected to help an estimated 7 million Americans — 200,000 in Georgia — retain health insurance. Paying 35 percent of the premium is close to what many current employees pay, said Bill Custer, a health insurance expert at Georgia State University. The U.S. Chamber of Commerce, though, said the change may raise costs for employer health plans because individuals who take COBRA tend to be sicker and have higher medical costs.

Employers are confused about the COBRA revisions, the U.S. Chamber of Commerce said: Confused over whether to calculate a person’s income before or after termination; whether people taking a buyout are eligible; on how to determine a spouse’s income.

Many individuals will have similar questions — whether their termination was involuntary, for example.

“If you think it’s hard for benefits managers to understand, try the average person on the street,” said James Gelfand of the Chamber of Commerce.

The U.S. Department of Labor is required to produce guidance for companies by mid-March, and employers must notify eligible individuals by mid-April. “There are a lot of administrative challenges, and many unanswered questions,” said Amy Bergner, a principal at consulting firm Mercer.

For general information, you can go to the U.S. Department of Labor Web site — dol.gov/ebsa/cobra.html — or for specific questions, call the Labor Department’s national toll-free call center at 1-866-444-3272.