Hello all,
As someone who had been laid off for quite awhile and has a mild, but chronic illness, (and have friends in the same situation) I have followed the developments about the COBRA legislation for a good long while and would like to share with my Kossack friends a few "behind the scenes" details about it and especially what's happening this week around April 18th-21st.
Please note; some of what I'm about to relate is cribbed from the Department of Labor's website.I strongly suggest you view it. The new FAQ section on the premiums went up the last week of March.
For those not sure about what COBRA is, here's a brief description: It is an acronym for the Consolidated Omnibus Budget Reconciliation Act. It was a law passed in 1986 (and tweaked every so often from then on) that allows an individual that has been fired from their occupation to at least briefly continue with that same employer's group health plan if they so wished.
In other words, say Jeff was covered under AETNA, and got laid off from his job; Jeff could keep the exact same plan, keep seeing the same doctors, getting the same treatment, with the same deductible, co-pays, blah blah blah. The caveat: Jeff is now responsible for 100% of the costs. Obviously, since he's no longer employed his ex-employer isn't subsidizing your insurance anymore.
For this reason, not many people ever chose to keep insurance under COBRA for more than a few months. After all, paying $300-$1100 a month for insurance would be hard enough while you're employed, forget it while you're not.
With The Great Recession in full effect right now, there are millions of Americans now eligible for COBRA and willing to pay those costs. (Dig into the savings, borrow from the parents, God knows what else...)
The American Reinvestment and Recovery Act (ARRA) is going to (temporarily) reduce the monthly premium for COBRA coverage for eligible individuals.
Becasuse the Labor department realizes that many eligible people may have turned COBRA down earlier because they couldn't afford it, the subsidy also comes with a second chance to apply. Under normal circumstances the law says you have to apply for COBRA within 60-90 days of being laid off. Since some people who rejected COBRA are well beyond that point now, that rule is being waived.
Individuals who are eligible for COBRA coverage because of their own or a family member's involuntary termination from employment that occurred from September 1, 2008 through December 31, 2009 and who elect COBRA, may be eligible to pay a reduced premium. Eligible individuals pay only 35% of the full COBRA premiums under their plans for up to 9 months.
This week, employers (or ADP, et al.) will be sending out the federally mandated application for the subsidy and a COBRA second chance.
Watch for it in the mail!
Who's paying for this? Your ex-employer. Their costs will be offset by a tax credit against the employees wage witholding and FICA taxes.
Because of the stimulus package there's a lot of anticipation about the funds set aside specifically for the reduction of COBRA monthly premiums. But there's also a lot of misinformation and outright lies going around. I have talked to people at both the Department of Labor and ADP (you know, the guys who probably processed your payroll checks) and gotten some reliable information. (As well as some honest "We don't know yet"s)
Chances are, your old employers' human resources department is not up to date on ARRA in specific or even COBRA in general. Why? Understand something: most companies outsource COBRA administration to someone else; such as, say, ADP. They don't have to do this, but they prefer it. Think about it. They're no longer able to debit your paycheck for the medical benefits.
That means they'd have to form a separate adjunct that would deal with receiving the premiums, delivering notifications to the insurance company, chasing you down when you're late, or conversely, having you (the former employee) call them every other day when there's a problem with making payments. They'd really not rather do this for someone who doesn't work for them anymore. So they palm off COBRA recipients to a company like ADP that will handle the billing/admin for them. (Of course ADP handles payroll for almost every company in the universe, so they're able to offer COBRA administration as part of a nice little package deal.)
Therefore, the sole responsibility of your former employer is to deliver information about you and the group health plan you were on at the time of your determination to ADP, and that's it. So they don't really have an incentive to stay up to date on COBRA or every little nuance of the ARRA. Again, they really don't want to have to deal with former employees at all, so they're not going to stay up-to-date on things that concern the unemployed individual.
So having said that, let's talk about April 17th.
If you were laid off ON OR AFTER Sept 1st, 2008, you will be receiving an application for the ARRA Subsidy. Your company (Or the COBRA Administrator they have hired) must send this to you by April 21st or they are in violation of federal law. If you have moved (as many people out of work have had to do in recent months), I strongly advise geting in touch with your former employer and getting your address change to them. I also advise following up the phone call with an email.
The letter coming on April 17th is going to have four parts to determine your eligibility. The first three are critical:
- Were you involuntarily terminated?
- Was the termination between September 1, 2008 and December 31,2009?
- Do you CURRENTLY have access to a group health plan?
- Will your income for 2009 exceed $125K (single filer) or $250K (joint)
Here's the deal on each of those:
- If you were fired for some reason other than run-of-the-mill layoffs (like say, taking a dump on the hood of the CEO's BMW :), then you're not eligible. Sorry. (If you did do such a thing, your ex-employer likely be sending your name on a list of "NOT ELIGIBLE PEOPLE" to the COBRA administrator they hire)
- If you were fired on August 31, 2008, sorry. As Don Adams would say, you missed it by that. Yes, that part sucks. (And unfortunately, there's more suckage coming.)
- If you're working, but haven't gone on the group health plan your new job offers, you're not eligible. If your spouse/partner is working, and has access to a group health plan at their job, you're not eligible. Now, if you or your spouse is working but you/they don't have enough time on the job to qualify for group health benefits, you may qualify. If you are gay or have a domestic partner and are not eligible for your partner's group health plan, you are be eligible.
- You can apply for the subsidy no matter your income level. BUT... be advised, if you cross the threshold for income, you'll have to pay back the subsidized amount back on your 2009 tax return. So if you're fairly certain you will pass the proscribed income levels, you're probably better off not filing for the sub.
Once again, this form is going out to all people who were laid off on or after Sept 1st, 2008, whether you are currently on COBRA or simply if you qualified for it but didn't take it.
More questions that I had:
Q: If I want to apply for COBRA under the "second chance" but don't qualify for the subsidy, can I still apply, and just pay the normal price?
A: Right now, No. That could possibly change. See below.
Q: Im on insurance under COBRA, but I elected to not include any of my dependents on at that time because of the cost. Can I do that now with the second chance?
Or
Q: I only chose to continue my Dental coverage under COBRA after my layoff because Medical was too expensive. Can I now go back and add Medical?
A: The answer to both questions is yes, provided your ex-employer's group health plan allows it.
Q: The subsidy is only for nine months, yes? What about after that?
A: For 90% of people on it, COBRA only lasts for 18 months maximum (exceptions include being on disability, Medicare, etc) If you are taking COBRA as a second chance, you'll get the nine-month subsidy and are eligible to stay on for another nine months. You don't have to, though. If you want to end coverage after the nine months is up, you're free to do that, no problem. You are uninsured again at this point.
Q: Well wait, I've been on COBRA since October of 2007. My overall eligibility ended March 31st. What do I get?
A: You can apply for the subsidy and get reimbursement for March.
Q: Anything else besides that?
A: Sorry. And that's one of the bad things about this.
Talking to ADP, I found that, although lawmakers never considered too many people would need be on COBRA longer than 3-4 months, a lot of people in fact do max out the 18 months.
One of the biggest reasons: Pre-existing conditions. Oftentimes, people will get another job, but their new employers' plan won't cover a PEC, so they choose to pay full-price for their ex's plan.
This is one of the first things that must be covered by Obama's DHHS when formulating a comprehensive national care plan. Once again, COBRA can run almost $500/month for just one person. No one is on COBRA because it's a luxury -- they're doing it because they have to, as in, they have no alternatives.
Q: When are we going to be put on COBRA if this is our second chance?
A: Let's start with the bad news right up front: the subsidies are not coming with anything approaching speed. In fact I have heard that August is the date for which one can expect subsidies.
Q: How can this be? Wasn't the law passed in Feb 17th??
Yes that's absolutely true. The short answer why this is taking so long: It's the government.
The long answer? Well this is an unprecedented move, and understandably, Obama and the Labor Dept want to get it right. They want to try to keep fraud to a minimum. Hence the applications. And applying for COBRA in general, on a good day, can take up to 30 days regardless.
Plus, as explained to me by ADP, there's the technology factor: ADP's computers will take no less than 90% of a person's due premium. They'll reject anything less.For example, let's say Donna is a person currently on COBRA. Let's say the monthly premium for Donna's group health plan is $500/mo. If she sends in a check for $450, she's fine. ADP will wait for the remaining 10%. If she sends in $434, the payment will be rejected because that's less than 90% of her premium.
So imagine if tens of thousands of people start sending in 35% of their premiums and get rejected. That's ADP's worst nightmare. So they've got to get shit right. They've got to configure the computers to handle the difference between people getting the subsidy and those NOT getting it. These things take awhile.
Also, the rep I talked to at Labor said that even though they spent almost a month formulating this thing, it's quite possible that elements will have to be "tweaked". In other words, there's all sorts of things that probably won't be realized until the application goes out and people start ringing Labor's phone off the hook. So [i]not everything is cast in stone yet[/i] and they recognize that.
Q: When will my be coverage be retroactive to once I sign up for the "second chance"?
February 17th. (or later, depending on when your benefits ended.) And this, kids: Even with the subsidy you still have a substantial layout ahead of you; if you choose to apply for the subsidy, you will have to pay retroactively back to Feb 17th, or whenever your billing applies. Going back to Donna's example: Let's say Donna applies for the new subsidy. The subsidy checks become active in August. So Donna's new out of pocket cost will be $175. Here's the thing though: Donna has to pay $175 going back to March 1st,(which is the first day after Feb 17th, that her ex-employer's group health plan billing cycle started anew). Donna must pay March, April, May, June, July, and August to get caught up.
So Donna has to come up with $1050, in order to get signed up on this thing. And then she'll have three months of coverage at the subsidized rates after that. Now there's good parts and bad parts to this aspect. Let's say Donna accumulated thousands or even tens of thousands of dollars in medical bills since getting laid off. Anything that was billed in March, she can now get reimbursed for by her insurer.
But on the other hand, here's Marty: He's avoided going to the doctor for anything over the last six months. Marty would have to pay six months for nothing, and would have three months of subsidized coverage
****
I know a lot of the aspects of this seem horribly unfair; recognize that much of this unfairness springs from the inherent inequities in our laws, the costs of insurance in general and the idiocy of the last eight years. The money that was spent fighting in Iraq, the tax giveaways to big business, all that could have gone to fixing our health care system, but ...ah, best to not get off on a rant. I'll be here all day.
In closing, let me hit these points again:
I strongly strongly suggest you check out the Department of Labor's FAQ web page on EBSA and ARRA. I've only covered a little bit here.
If you've moved, Call Your Ex-Employer.
If you don't get an application by April 22nd and you feel you deserve one, again, Call Your Ex-Employer. Once again, I don't recommend using them as your first source of information on this; after you get an application and you have some specific questions you can call them, but I would more recommend emailing the DOL.
Keep in mind, the subsidy only lasts for nine months. For some of you it might be worth it, for others, it might not. Weigh your options carefully.
Have a great day, guys.