Reminder: People who have recently lost their jobs or are laid off this month may be eligible to claim government help with their health-insurance premiums. The right to claim the subsidy, which pays 65 percent of the cost of continuing employee coverage under COBRA, is set to expire at the end of February—though a provision in President Obama's 2011 budget proposes to extend that deadline. If passed, the proposal would make workers laid off between March and December 2010 eligible for subsidized COBRA insurance for 12 months, down from the current 15. (COBRA law offers employees who lose their job continued insurance for 18 months.)
The COBRA subsidy was first pitched as part of the federal stimulus approved last February. Launched in March, it applied only to employees laid off between September 2008 and December 2009. Lose your job today—or before March 1—and you could get reduced COBRA premiums for up to 15 months. That deadline was set by Congress in December when it extended the original subsidy. Benefits consultant Hewitt Associates reported then that monthly COBRA enrollment rates had climbed 20 percentage points, from 19 percent measured before the subsidy to 39 percent nine months after its enactment.
Though many have found it alluring, the COBRA subsidy comes with conditions. It generally applies only to companies that have 20 or more employees and to workers enrolled in an employer plan before being involuntarily terminated. You cannot get the subsidy if you are eligible for coverage through a spouse or Medicare. If you make more than $125,000 ($250,000 for families) in the year you receive the benefit, you will end up paying part or all of it back. The law also does not apply if your employer goes belly up.
Your employer or plan administrator should notify you if you are eligible. You have 60 days after receiving notice to elect COBRA coverage, according to the Department of Labor's website, which features FAQs on COBRA and the subsidy. For other subsidy questions, the department has a benefits adviser line (1-866-444-3272).
Even with the subsidy, COBRA coverage is pricey. And once the benefit runs out, your monthly premium could leap from, say, $397 (the average subsidized COBRA premium for a family plan in Maryland) to an average of $1,133. Subsidized family plans cost $389 a month on average, according to data from Families USA, a nonprofit health advocacy group. Unsubsidized COBRA plans cost an average $1,111 a month. In comparison, online insurance broker eHealthInsurance reports that family plans in the individual insurance market are running about $383 a month.
Sam Gibbs, senior vice president at eHealth, encourages anyone eligible for COBRA to sign up first thing so they know they are covered. If you find a better, cheaper option in the private market, you can drop out. Those with health problems, though, could be denied coverage, so they should not cancel COBRA without written notification from a carrier that they are covered, says Gibbs. Families might look into private plans to cover the kids, who are more likely to qualify. Plus, Gibbs says, they can keep the coverage they get beyond 18 months, at which point COBRA would end for good.