Can You Count on a COBRA Subsidy? Maybe Not

New study shows that where they live makes the difference in whether workers at small firms qualify.

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It has always been more challenging for workers at small firms to get affordable health insurance. Premiums are often higher and the coverage skimpier than at larger companies. But now a study highlights another area where workers laid off from companies with fewer than 20 workers get pinched: The 65 percent government COBRA subsidy to help people extend their health insurance is either not available to them or not as comprehensive in many states.

The COBRA subsidy, which was passed as part of the economic stimulus package in February, gives 65 percent of COBRA premiums, for nine months, to workers who are laid off between September 2008 and the end of this year. I've written about details of the subsidy before. But the subsidy applies only to workers laid off from companies with 20 or more workers; workers at smaller firms have to rely on state "mini COBRA" laws to determine whether the subsidy is available.

Although many states have made strides in the past few months to add or expand their "continuation coverage" laws, as they're called, others have not. According to the Families USA study, nine states don't have mini-COBRA laws on the books at all. They're not all ultraconservative states, either. Workers at small firms in these states aren't even eligible for COBRA coverage, much less the 65 percent subsidy: Alabama, Alaska, Arizona, Delaware, Hawaii, Idaho, Indiana, Michigan, and Montana. Pennsylvania has legislation pending, according to the report.

Six states make continued coverage available for fewer than the nine months designated in the subsidy: Arkansas (120 days), Nebraska (six months), New Mexico (six months), Oklahoma (one month at present, would increase to four months with pending legislation), South Carolina (six months), Tennessee (three months).

This Saturday is the date by which large employer health plans have to notify workers that they have a second chance to elect COBRA if they were laid off between September of last year and February 17, when the stimulus bill was signed. They then have 60 days to elect COBRA. So for those workers who passed up COBRA originally or dropped it before the new law was signed, this is another chance to sign up. Unfortunately, many workers at small firms will never get even a first chance.

Check out my post on how to get health coverage if you're retired; the tips for early retirees apply to many laid-off workers. Community health centers around the country offer services on a sliding scale based on income, and some organizations are also making free care available on a limited basis to unemployed, uninsured workers.