By Cathy Miller, Business Writer
In a previous post, we were watching the clock run out on the federal subsidy for COBRA coverage. In the nick of time, Congress approved an extension on the original December 31 deadline. A report from Hewitt Associates released immediately after the extension illustrates the impact of the subsidy.
Show Me the Money
Prior to the subsidy, eligible terminated workers paid the full COBRA premium – plus an administrative fee – to continue coverage under their former employer’s health plan. With the original legislation, eligible individuals received a 65% federal subsidy for nine months. Their COBRA eligibility had to start by December 31. Without an extension, many faced huge increases in what they paid for COBRA coverage.
The new bill from Congress made two changes to the original COBRA subsidy. First, it extended the eligibility period to individuals who lose their job to no later than February 28, 2010. Second, instead of the original nine months, the federal subsidy now continues for 15 months.
As a recent publication from the Kaiser Family Foundation shows, the subsidy makes a big difference in the average cost of coverage for individuals and families. For an unemployed worker, the extra savings is a welcomed relief.
Since the introduction of the original subsidy in March 2009, the Hewitt report shows a 20 percent increase in COBRA enrollment. The study looked at enrollment for 200 large employers with eight million employees. Between March 2009 and November 2009, 39 percent of those eligible for the subsidy enrolled in COBRA, as compared to 19 percent who enrolled between September 2008 and February 2009. The report showed some interesting industry-specific results.
The industries with the largest overall increase in COBRA enrollment were:
- Industrial Manufacturing – from 7% to 67%
- Aerospace & Defense – from 30% to 63%
- Pharmaceuticals – from 20% to 44%
- Media – from 13% to 36%
- Business Services from 20% to 42%
The Insurance industry enrollment increased from 23% to 40%.
A New Clock Ticking
For insurance agents’ clients that either dropped coverage or paid full premiums, there are important new deadlines and provisions. The following describes some of the provisions for those caught in the transition.
- Individuals who received full nine months of subsidy – are eligible for the full 15 months (an additional six months) provided they pay all of the reduced premium amount within 60 days of the enactment of the extension – or – within 30 days of being notified of the extension (whichever is later)
- Individuals who paid full COBRA premium – after receiving the nine months of subsidy, receive a refund for the amount overpaid – or – can have that amount applied to future premiums. No timeline was set for reimbursement; however, agents should instruct clients to contact their COBRA administrator.
The subsidy is a band-aid that creates a temporary fix for maintaining health insurance coverage in these tough economic times. More than ever, clients need the sound advice and industry knowledge their insurance agent can provide. Additional subsidy information is available at the Department of Labor’s website at dol.gov.
Cathy Miller, Business Writer/Consultant has over 30 years of professional writing with a specialty in health care, employee benefits and wellness. Cathy also has an active Life/Accident/Health insurance license. Visit Cathy at her business writing blog, Simply stated business to Keep it simple, clear & uniquely yours.
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