Ask Kim
What to Do When Your COBRA
Subsidy Ends
Hang on to your coverage because Congress is expected to pass some form of COBRA-subsidy extension.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
December 8, 2009
I lost my job at the beginning of the year, and I started receiving the government subsidy that helps me pay my COBRA health-insurance premiums soon after the stimulus law was passed. Now my nine months of coverage are almost up, and I’m expecting my premiums to jump from $455 to $1,300 when I get my bill this month. What should I do?
The stimulus package, which included a 65% subsidy for COBRA premiums, has provided much-needed help for millions of workers laid off between September 1, 2008, and December 31, 2009. The law was passed in February 2009, so the nine months is expiring for many people who signed up early, and more people will be losing the subsidy every month. You can keep health insurance through COBRA for up to 18 months after you lose you job; but once the subsidy ends, the cost of premiums will more than double -- from an average of $389 per month to $1,111 per month, according to Families USA.
Several bills in Congress now would extend the COBRA subsidy to people who lose their jobs after December 31, 2009, and might extend the length of the subsidy from nine months to 15 months.
Kathleen Stoll, director of health policy for Families USA, expects Congress to pass some form of COBRA–subsidy extension after the holiday break. If a bill does pass, it is not clear whether it will provide back payments for people whose subsidies have already expired. Or Congress could pass a version that extends the COBRA subsidy to people who lose their jobs after December 31 but that doesn’t extend the nine-month limit.
Because so much is up in the air, people whose subsidies have expired or are about to expire may want to pay the COBRA premium at the full rate for at least a month while they wait to see what happens. “Even though it could be challenging for people to keep paying their premium, I think it’s safer to pay it to stay on COBRA and keep your options open,” says Mike Langan, of Towers Perrin, an employee-benefits consulting firm.
We generally recommend that healthy people compare the cost of individual insurance to the price of COBRA because they may get a better deal on their own. But if you drop COBRA now and buy an individual policy, you run the risk that you may not be allowed to go back on COBRA if Congress extends the subsidy. When the stimulus law was first passed, people who had elected not to take COBRA were allowed to sign back up to take advantage of the subsidy. But there’s no guarantee that will be an option again.
Delaying a decision on COBRA is also a good idea because Congress may pass health-care reform in the next few months. Even though many provisions won’t take effect until 2013 or 2014, a few key items could affect people right away -- such as provisions that could extend COBRA beyond 18 months until 2013 and changes to maximum coverage limits offered by health-insurance policies, says Langan.
By all means, reassess your options in a month or two. If Congress does not extend the COBRA subsidy and you and your spouse still don’t have jobs with health-insurance benefits, look for a better deal on your own, if you’re healthy. You can shop for individual health-insurance quotes from many companies at eHealthInsurance.com, or get help from a health-insurance broker at www.nahu.org.
Got a question? E-mail me at askkim@kiplinger.com.
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Reader Comments (9)
Posted by: Marilyn Ambrosini at 12/08/2009 12:30:35 PM
Hello Kim, my husband is 60 and I am 59 years old. If we both loose our jobs, we would not be able to afford health insurance, either COBRA or individual insurance. We are not eligible for Medicare either. What do we do then? That is why I am hoping for a Public Option plan. I think it would make the costs more reasonable for people who are in the same situation. If all fails, what options would we have? We have assets so we can't get federally/state subsidies. Thank you.
Posted by: Don at 12/08/2009 03:28:00 PM
I am 63 ans i knew my 9 month cobra subsidy was ending soon I started shopping around---I had an HSA with a $2000 deductable 80/20 payments up to $4500 max. out of pocket---found an HSA with $2,500 deductable-----80/20 paments up to a $3750 max out of pocket---my payment were going from $142 amonth to $418 under cobra----------------yet my rate for my new policy is only $168/month-----------I am in excellent health,not overweight,,,no high blood pressure,taking no medication, and a non-smoker---oh yes single------so before your cobra subsidy runs out start shopping around----------it took me 32 agents before I found this policy--------------also the same policy from the same insurance company will vary by 40% in price from different agents------------also agents will tell you when you give a lower rate is the agent with a far lower rate is lieing to you or is a switch and bait tactic--------the most important thing to remember is that an insurance agent is not your friend
Posted by: Eric at 12/09/2009 01:32:42 AM
Marilyn, In your hypothetical, I would comment that either you do have money for health insurance (assets that prevent public subsidy), or you don't. You are proposing that a band-aid for this (apparently) fictional situation is a trillion-dollar public program. For the folks that have assets, medical insurance helps protect those assets from healthcare expenses. There is a private solution available now. That coverage is expensive because of the actuarial cost of insuring a 59 and 60-year old couple, plus a modest profit. In arguing for a public option, you are wishing for one of two situations: 1. Public option saves the modest profit, or 2. The public option collects money from others to subsidize your coverage. If #2 is the goal, then there is a deep chasm between you and me that cannot be reconciled on a message board. If #1 is your hope, then consider that somewhere near 30% of Medicare spending is on fraudulent claims. This far outstrips any profit that a private corporation collects. Our government is not particularly good at doing anything except promising people benefits (Social Security, Medicare, etc.) and then borrowing money from China to fund it.
Posted by: Robert at 12/09/2009 04:41:43 PM
Eric, We are both on the same page with the public (government) option. The issue Marilyn has with health care coverage is the cost. What she does not realize is that even if the public option passes, it will not take affect until 2013 or 2014. She states they have assets. The question is what kind of assets and how much? Too many people desire someone else (taxpayers) to pay for there health care coverage. Don't misunderstand me, I am in the same boat. We both lost our jobs in the past 5 months. We are in our early 50's with modest assets. It very well may cost $500-$800 a month for adequate coverage with a reasonable deductable. The issue of health care cost should have been addressed years ago. The people that feel the bite the worst are the lower middle income workers. I don't have the answer, that is why we have Nancy Pelosi and Harry Reid, God help us all. I do know if you want the best, there is a price for it. Good luck Marilyn
Posted by: ReformCobraNow at 12/10/2009 12:15:28 AM
Those who lost their jobs prior to the September 1, 2008 eligibility cut-off date never received any assistance with their COBRA premiums. Many if not most of those same people are not even eligible for COBRA now because their 18 months of coverage has expired. Even those who were lucky enough to receive the subsidy in the first place are starting to loose their coverage and are joining the estimated 50 million uninsured. According to a Harvard study, uninsured adults are 80% more likely to die from a traumatic injury than those who have insurance. Currently their are two bills working their way through congress that may offer some relief. For more information on these bills and other options to COBRA, please see our website at cobrareform.weebly.com.
Posted by: inform at 12/15/2009 06:19:19 PM
Everyone is concerned with COBRA and its cost & should be. Maybe we all should contact Senator J. Leiberman and ask him, why he is doing everything he can to deny millions of us affordable health care, while he & his fellow Senators have ---TODAY--- a great family health plan paid by you & me!!!!!! Easy to do @ www.congress.org.
Posted by: Heather at 12/23/2009 03:37:20 PM
(How) exactly is this subsidy helping Americans make COBRA payments?? My husband lost his job a month ago and we are due to pay our first month premiums of $1,100. Now without a job, this seems silly b/c obviously we can't pay for this, BUT with a 65% break, WOW...we could actually make ends meet! What do we need to do?? Please help this young family of 4 :)
Posted by: Kim at 01/04/2010 06:36:58 AM
Hi Heather, this is Kim Lankford. Your husband should contact his former employer about receiving the subsidy. If he is eligible -- and it sounds like he is -- then he'd pay 35% of the COBRA premiums and his former employer would pay the remaining 65%. His former employer would then be reimbursed from the goverment for the subsidy. I wrote a column soon after the law was passed, with details about who qualifies and how to start receiving the subsidy (see my "Get COBRA Coverage for Less" column on February 23, 2009). But there have been two significant updates since that article came out -- the law was just amended in late December to extend the COBRA subsidy from nine months to 15 months, and now applies to people who lose their jobs until February 28, 2010 (it originally only covered people who lost their jobs by December 31, 2009). I'm writing my column today (1/4/10) with more information about the new rules. Hope this helps.
Posted by: Steve at 01/26/2010 10:11:03 PM
Hi Kim. I have a question for you. I am receiving Cobra. I was laid off in August and started to get Cobra benes on Sept 1 2009. My insurance was a traditional plan with a good insurance carrier, so my insurance was good. Now I have received a letter from my former emplyer that they are changing their insurance to an HSA plan starting Feb 1 2010. Under this plan my Cobra premium might go down slightly (not sure yet of the price), but my former employer is not contributing to the plan - so I need to shell out additional money to put into the account for medical benefits. My deductible is 4k a yr. So basically I have to pay out 4k of my own money before I get benefits PLUS still pay Cobra. Something doesn't seem right here. Is this legal for them to do this?? Thanks!