Take Advantage of the Extended COBRA Subsidy

I lost my job last year and have been receiving the 65% subsidy to pay my COBRA health-insurance premiums. Is the subsidy going to be extended beyond nine months?

There’s good news for people who lose their jobs -- Congress did extend the COBRA subsidy in late December.

Last year’s economic-stimulus plan originally provided a government subsidy to help people who lost their jobs between September 1, 2008, and December 31, 2009, paying 65% of their COBRA health-insurance premiums for up to nine months. But that nine months ended in November for people who started receiving the subsidy right after the stimulus law was passed last February. People were also concerned that they might not get the subsidy at all if they lost their jobs after December 31.

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The law was amended in late December to extend the COBRA subsidy from nine months to 15 months. And it now applies to people who became unemployed between September 1, 2008, and February 28, 2010.

If you were receiving the subsidy, you don’t need to do anything else to get the extra coverage. You’ll just continue to pay 35% of the COBRA premiums, and your former employer will be reimbursed by the government for the remaining 65%.

If your nine months of COBRA subsidy expired before the extension was passed, however, you could get some money back. If you paid 100% of COBRA premiums in December, for example, the Department of Labor recommends that you contact your plan administrator or former employer to request a credit for future months of coverage or a reimbursement for the overpayment. And if you had dropped COBRA after the subsidy expired, you’ll be given some extra time to pay the missed premiums and retain your coverage. You must pay your 35% share of the COBRA premiums by February 17, 2010, or 30 days after receiving a notice of the extension from your plan administrator (whichever is later) to keep the coverage. For more information about the COBRA subsidy and your rights, see the Department of Labor’s COBRA Continuation page.

You still cannot receive the subsidy if you are eligible for other group health coverage (such as a spouse’s plan) or Medicare. And, as before, you can qualify for the subsidy only if your income for the year is less than $125,000 if you are single or $250,000 if you’re married filing jointly (the subsidy phases out entirely once your income reaches $145,000 for single filers or $290,000 for joint filers).

The rest of the COBRA rules remain the same. In most cases, only companies with 20 or more employees are required to let former employees continue on their group health-insurance plans through COBRA (although some states have similar requirements for smaller companies). After the 15-month COBRA subsidy expires, you’ll have to pay 100% of the premiums yourself, plus an administrative charge of up to 2%. COBRA coverage generally lasts for only 18 months after you lose your job, although it can end earlier if your employer goes bankrupt or discontinues its health-insurance plan for current employees. But those rules may change if the health-care-reform law is signed. The House bill would extend COBRA eligibility beyond 18 months until 2013.