Helping
Laid-Off Workers Pay for Health Insurance
By Michelle Singletary
 There's
one Web site you need to check often if you intend to
benefit from the many consumer provisions in the
stimulus plan.
That Web site is http://www.irs.gov. It's essential
because several key provisions in the stimulus package
aimed at individuals and families are going to be
interpreted and implemented by the Internal Revenue
Service.
For example, the recovery law includes changes to the
health-benefit provisions of the Consolidated Omnibus
Budget Reconciliation Act, which is commonly referred to
as COBRA. The new law includes a temporary COBRA premium
reduction.
If you have questions about the COBRA provisions in the
new law, go to the IRS site, and in the search field on
the home page, type American Recovery and Reinvestment
Act of 2009. This will take you to a page with
highlights of the tax-related provisions in the new law.
Under COBRA, employers are required by law to offer the
option of continuing your health insurance for up to 18
months. Coverage can be extended up to 36 months under
some circumstances, such as a divorce, disability or the
death of the policyholder.
The problem for many people is that they have to pay the
full amount for the COBRA coverage plus an
administrative charge. Sadly, many people getting laid
off who want to keep their health insurance would face
paying a substantial monthly amount to keep it. Family
coverage can cost on average about $1,000 a month,
according to Families USA, a national nonprofit. The
average monthly COBRA premium for individual coverage is
$388.
Nationally, to maintain single coverage, the average
unemployed worker would need to spend 30 percent of his
or her unemployment insurance check on COBRA premiums, a
recent report by Families USA found. On average,
unemployed workers would need to spend nearly 84 percent
of their unemployment income to pay for premiums for
family coverage.
The new law takes into account that people were
struggling to pay for COBRA, so it allows eligible
terminated employees enrolled in their employer's health
plan to get a subsidy to help fund the cost of the
health insurance. This has been set at 35 percent of
your COBRA payment, for up to nine months. Employers
will pay the remaining 65 percent and recoup that money
by applying for a credit on their quarterly federal
employment tax return. You may also be eligible for the
subsidy for group health-insurance coverage provided
under state laws similar to COBRA.
To qualify for the reduced COBRA payment, you must be
involuntarily separated from your job between Sept. 1,
2008, and Dec. 31, 2009. Those who are eligible for
other group health coverage (such as a spouse's plan) or
Medicare are not eligible for the premium reduction.
The subsidy phases out for individuals whose modified
adjusted gross income exceeds $125,000, or $250,000 for
those filing joint returns. Taxpayers with modified
adjusted gross income exceeding $145,000, or $290,000
for those filing joint returns, do not qualify for the
subsidy.
There's another catch to this payment break. The premium
reduction applies to coverage beginning on or after Feb.
17, when the law was enacted. You cannot get a refund
for premium payments paid prior to the law's enactment.
If your company closed or went bankrupt and there is no
longer a group health plan, there is no COBRA subsidy
available.
The COBRA subsidy ends once you become eligible for
other group coverage (or Medicare) or after nine months
of receiving the subsidy, or when the maximum period of
COBRA coverage ends, whichever occurs first.
There's another important provision to the COBRA
subsidy. If you were involuntarily terminated between
Sept. 1, 2008, and Feb. 16, 2009, but you didn't sign up
for COBRA (probably because you couldn't afford it), or
you are no longer enrolled (because you couldn't afford
to keep up your premium payments), you may have another
opportunity to elect COBRA coverage, according to the
Department of Labor. Your plan is required to notify you
of the second election period by April 18, after which
you have 60 days to enroll for COBRA coverage with the
premium reduction.
For more details on the COBRA subsidy, go to the
Department of Labor's Web site at
http://www.dol.gov/COBRA. You can also call the Employee
Benefits Security Administration at (866) 444-3272.
On the IRS Web site, there is a helpful
question-and-answer section on the COBRA provision for
employers. Employers can also find a revised version of
the quarterly payroll tax return that is needed to claim
credit for the COBRA medical premiums. IRS Form 941,
Employer's Quarterly Federal Tax Return, will be sent to
about 2 million employers in mid-March, according to the
IRS.
Unfortunately, even with the COBRA subsidy, you may
still find the insurance premiums cost-prohibitive. But
this is an important benefit, so take advantage of it if
you qualify and can pay for it.
-- On the air: Michelle Singletary discusses personal
finance Tuesdays on NPR's "Day to Day" program and at
http://www.npr.org.
-- By mail: Readers can write to her at The Washington
Post, 1150 15th St. NW, Washington, D.C. 20071
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