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Obama Proposes COBRA Premium Subsidy Extension

February 2, 2010
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Federal COBRA health insurance premium subsidies provided to involuntarily terminated employees would be extended again, the Obama administration proposed Monday, February 1.

Under the latest extension—embedded in the administration’s proposed federal budget for fiscal 2011—employees who are laid off from March 1 through December 31, 2010, would be eligible for the 65 percent premium subsidy for up to 12 months.

Under current law, employees laid off from September 1, 2008, through February 28, 2010, can receive the premium subsidy for up to 15 months. Those individuals would not be affected by the latest extension.

Benefits experts say Congress will be very receptive to the proposal. “As long as unemployment remains at high levels and access to health insurance coverage remains spotty, the willingness to extend COBRA assistance will remain strong and persistent. It also appeals to members of Congress on both sides of the aisle,” said Frank McArdle, a consultant with Hewitt Associates Inc. in Washington.

Nearly one year ago, Congress included COBRA premium subsidies as part of a broad economic stimulus package it approved. The American Recovery and Reinvestment Act of 2009 included a 65 percent COBRA premium subsidy to employees laid off from September 1, 2008, through December 31, 2009. The subsidy was available for up to nine months. Congressional researchers estimated that the subsidy would benefit about 7 million former employees and their families at a cost of about $25 billion to the federal government.

Then in December, as part of a Defense Department spending bill, Congress approved a six-month extension to 15 months for employees involuntarily terminated from September 1, 2008, through December 31, 2009.

In addition, employees laid off through February 28, 2010, are eligible for a 15-month subsidy. Without that extension, employees who lost their jobs after December 31, 2009, would not have been eligible for the subsidy.

The 65 percent premium subsidy has significantly boosted the percentage of laid-off employees opting for COBRA. In a survey of 200 large employers, Hewitt found that the percentage of employees opting for COBRA more than doubled to 39 percent from March 1, 2009, when the subsidy generally first became available, through November 30, 2009.

By contrast, from September 1, 2008, through February 28, 2009, an average of 19 percent of involuntarily terminated employees opted for COBRA.

An extension of the COBRA premium subsidy law also is expected as part of a jobs bill Senate Democrats are expected to unveil this week, possibly as soon as Tuesday, February 2.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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