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Federal stimulus reduces cost of COBRA for some

Posted April 2, 2009
Updated April 3, 2009

For people who are laid off, after the paychecks stop, the cost of health insurance goes up.

By law, employers with 20 or more employees must offer COBRA continuation health coverage. It allows former employees to keep health insurance benefits for up to 18 months. However, the employee has to pay the full premium, plus 2 percent. That can get expensive.

Laidoff have options for health insurance Laidoff have options for health insurance

The federal government is stepping in to help by picking up 65 percent of the COBRA premium for those who qualify.

The subsidy was welcome news for Phillip Waldron. When he was laid off from his IT job with CarQuest before Christmas, he also lost health coverage for his family of four.

"Yeah, that's the scariest thing. It's so expensive, and yet it's so important. I mean, you can get by on hot dogs and chicken nuggets. It's not fun, but you can do that. But you have to have your medication to go to school and have a successful day,” said Leslie Waldron, Phillip's wife.

The Waldrons soon learned that their sons, Jonathan and Jonah, were eligible for Medicaid. They can go to the dentist, doctor and get prescriptions for just $1. But health insurance for Leslie and Phillip wasn't going to be as cheap.

"We knew that the cost of COBRA was overwhelmingly expensive and that it would draw from all of resources and take all of our funds away,” Phillip Waldron said.

The Waldrons turned to eHealthInsurance.com, a Web site that compares the cost of COBRA with private health insurers and tailors coverage to individual needs.

"One of the things about the Web site is that you can run scenarios where you can change the deductible levels and benefit levels, and you can see the pricing changes,” said Sam Gibbs, an eHealthInsurance.com expert.

Comprehensive COBRA coverage came to about $1,000 month, so the Waldrons found a slimmed down private health insurance plan for $350 a month. The cheaper plan carried a $5,000 deductible.

"In case, you know, we break an arm or get in a car accident, you never know and then at least we have something to help us work out payment plans,” Leslie Waldron said.

Bob Harvell, with the North Carolina Department of Insurance, said thanks to President Barack Obama's stimulus plan, the price of COBRA should be 65 percent cheaper for some people.

To qualify, you must have been laid off after Sept. 1, 2008, and before Dec. 31, 2009. You can't make more than $125,000 per year. If you have a family and file jointly, you can’t make more than $250,000 a year.

The COBRA subsidy lasts for nine months.

"If somebody says, 'Well we'll pick up 65 percent of that so you can continue (being insured) until you can get yourself on your feet, maybe six or seven months, we'll help fund that for you.' Well, yeah, that's a great help for an individual,” Harvell said.

Employers should be sending out packets this month about the discount, so families like the Waldrons can apply for the cheaper COBRA.

However, if your company went out of business, you are out of luck.

Confused about how to qualify? Call your employer, or call the N.C. Department of Insurance at 1-800-546-5664 or the Department of Labor at 1-866-444-3272. If they can't help you, they can put you in touch with someone who can.

7 Comments

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  • affirmativediversity Apr 7, 2009

    I'm lost!!

    I sounds like this man solved his own problem by comparing costs and coverage from various insurers!

    What does this have to do with Obama's "control every detail of our lives" mania? It sounds like the government did NOTHING for this man but GET IN HIS WAY and attempt to charge him a 2% surcharge.

  • JAFOinWF Apr 6, 2009

    This title should read, "Federal stimulus reduces cost of COBRA for some... by taking from others"

  • momnay Apr 6, 2009

    This sounds great - get "someone" to help you pay for your COBRA if you loose your job - but guess who pays for it?

    "Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return."

    The employer then takes the amount as a "tax credit". This now becomes an added burden to a company who is already struggling and having to lay off their employees. This is why the article talks about companies that go "out of business". This is not a stimulus plan, but an added burden on employers and can amount to a death sentence for a struggling small business.

    http://www.irs.gov/newsroom/article/0,,id=204709,00.html

  • Ouaouaron Apr 6, 2009

    Soooo, explain to me again, anne53ozzy, how putting this on the ever-increasing federal tab is going to not lead to a "heavier tax debt?" We will not see anything in our lives that will be MORE expensive than "free" healthcare. Say goodbye to drug companies making any more innovative drugs, too, as the heavy hand of government stifles the last major country with a free market on prescriptions. We've been subsidizing the rest of the industrialized world. Instead of complaining to the UN to open those markets, we instead whine that we need to apply price controls. If the rest of the world were on a free-market system, our costs in the US would be less. Soon, with no profit motive, you will see an end to most new "wonder drugs."

  • Angry Independent Apr 6, 2009

    What's missing from the story is Cobra rates aren't special rates, they are normal insurance rates for fairly decent group policies. We all pay for insurance one way or another, whether it's your employer getting the same exact bill or ponying up the money yourself. Insurance is criminally expensive. Medical procedures are criminally expensive. But in this case the govm't decides to only help CERTAIN people with their medical expenses?

    It's a very poor bandaid that's only disproportionately taking money from one group to give it to another while ignoring the fundamental problem. The problem is that equal access to healthcare should be at an equal price for all. If it's too expensive, we all have to work on it together, rather than abandoning some individuals and rewarding others based on nothing more than the luck of the draw.

  • whatelseisnew Apr 3, 2009

    anne53ozzy - what is unfair is that some unborn person will have to pay for these people. That is truly unspeakable and abusive.

  • anne53ozzy Apr 3, 2009

    This is long overdue. It si unspeakbley unfair tha one would have to shoulder the cost of this insurance 100% after a layoff.
    All that does is either postpone the crtitcal health care issue for some that eventually lead to a heavier tax debt for the population in general or leave some unable to work again due to the deteriation of health issue they cannot afford to address. Or are too proud to go to the state hospitals that are mandated to treat you and again drive up taxes.....Go after the private insurers to absorb this burden and so the right thing