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Economic Stimulus Package Could Impact Health Insurance Coverage

June 3, 2009

Written By Mary Alice Hartsock
Reviewed By Rodney N. Warner, Esq

The federal stimulus package may make health insurance coverage more affordable for Americans who lost jobs involuntarily.

If you lose your job between September 1, 2008, and December 31, 2009, the government may pay for up to 65 percent of your premium for COBRA coverage, or coverage that you can use if you are ineligible for other group health insurance coverage. The language was included in the stimulus package, known as the Economic Recovery Act or the American Recovery and Reinvestment Act of 2009.

What is COBRA?

COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985. Passed into law by Congress, COBRA requires employers of 20 people or more to provide group insurance coverage for 18 months or more to employees that leave their jobs involuntarily. Employers that offered group health insurance to employees in the year before their termination must comply with COBRA.

This coverage may protect you if you become ill or need health insurance coverage when you have been laid off and are between jobs. COBRA also may cover your family members if they were covered under your insurance plan before you lost your job.

COBRA coverage may cost more than your insurance cost before you lost your job. Often COBRA coverage costs less than individual insurance plans, giving you an economical option at a time when you’re stretched for cash.

Not every employee who loses her job has access to COBRA. For example, you are not covered by COBRA if you are eligible for coverage through your spouse or domestic partner’s plan. Your income level and the way you left your job also determine your eligibility. If you get a new job that provides health insurance coverage or if you are covered under Medicare, you are not eligible for COBRA.

All companies that provide health insurance for their employees in a group plan have to abide by the COBRA law. However, companies with fewer than 20 employees are not required to provide COBRA coverage. In some states, companies with fewer than 20 employees may provide modified versions of COBRA coverage.

How Does Obama’s Plan Impact COBRA?

President Barack Obama’s Economic Recovery Act, the American Recovery and Reinvestment Act of 2009 (ARRA), says that individuals eligible for COBRA coverage must pay only 35 percent of their COBRA premiums. Employers must treat this 35 percent as the full payment by the employee. Employers are then entitled to receive a tax credit for remaining 65 percent of the cost of the coverage.

This option is available to those who lose their jobs between September 1, 2008, and the end of 2009. Starting on or after February 17, 2009, your premium will be reduced for up to nine months. If you lost your job before February 17, 2009, you are still eligible for a reduction in your premium, but coverage would not have begun until February 17.

How Do COBRA and ARRA Impact Me?

As a woman with breast cancer, you have ongoing healthcare needs regardless of your employment status. The challenges created by the economic downturn may make it harder for you to pay for your treatments or follow-up care. But caring for yourself and your health cannot wait for the economy to recover. It is extremely important for you to continue your treatment so you get the best outcome. If you finished treatment, your follow-up care is vital to your survival and well-being.

If you lost your job between the dates covered by this legislation, the AARA may make your coverage more affordable. To find out if you are eligible, contact the human resources department at your former job. If you declined enrollment in COBRA when you left your job, you may still be eligible to reapply for coverage.

Find out more about how the economic stimulus will impact COBRA coverage.

Click here to learn more about COBRA.