mericans do not know how to get US stimulus aid for their COBRA premiums after they have been terminated from their job. There has been a lot of confusion and questions about sources of information.

What is COBRA?

The federal COBRA law forces some, but not all, companies to extend group health benefits for several months after an employee is terminated. But you should also understand that the company does not have to pay the same contribution towards those health insurance premiums that they did pay for active employees! So just when a laid off employee loses their income they find that their health insurance bill has increased.

The financial stimulus bill included some aid for terminated workers by allocating funds to pay part of the bill. But there is lots of confusion about how to collect that money, and that is what I want to address.

Laid off employees should be notified about this aid. The former employer should do this, but this may be a slow process. Workers do not know how to get help paying the premium. They have many questions because they know that health insurance is important to their families, but are concerned about the expense.

Former Employers Should Answer Questions

The former company should pay the stinulus percentage of the COBRA permium (up to 65%), and then get paid by the government. The ex-employee will pay 35%, instead of 100% like they would have done before. This is helpful because financially strapped unemployed people will not have to pay the whole amount, and then wait for government reimbursement. So the HR departments of the companies shold have information about this!

COBRA Second Chances

Many terminated employees did not sign up for COBRA because of the price. But this additional aid may be an incentive to reconsider. A $1,000 a month premium may have been out of reach, but a $350 a month (35%) premium may be easier to handle.

Time Limits on Stimulus Aid

Normal COBRA extenstions last for 18 months, but the US stimulus aid only lasts for 9 months. After an ex-employee exhausts the 9 month benefit, they will be responsible for the whole payment.

Since COBRA bills average $1,000 a month for family coverage, this can be a huge concern. But hopefully, 9 months of subsidies can help many families until another job and health insurance plan is found.

Do All Workers Get COBRA after Termination?

Not all companies have to offer to extend group benefits. The subsidy will not apply to workers of smaller companies that do not fall under COBRA laws.

Should You Take COBRA or Individual Health Insurance?

Some people may find that COBRA group coverage is the right choice. Those with health conditions or with a pregnant family member should probably try to stay with their group plan if possible. But younger and healthier families, with no expectation of a pregnancy, may save money with private medical plans! Individual medical plans will offer their best rates to younger and healthier people.

Do be aware that normal pregnancies are not covered by many individual health isurance plans though. Of course, a period of unemployment may not be the best time to have a baby, but things do happen.

Available private health insurance policies will vary by local area, but consuemrs can try an online health insurance quote form, call an insurance agent, or find an insurance company. Internet health insurance quotes can be a great way to compare the prices and plans you may qualify for. They can also put you in touch with a qualified local health insurance agent who wants to compete for your business, and will certainly consult with you for free.

The Bureau of Labor Statistics of the U.S. Department of Labor recently reported that employment continued to fall sharply in February (-651,000), and the unemployment rate rose from 7.6 to 8.1 percent. Payroll employment has declined by 2.6 million in the past 4 months. In February, job losses were large and widespread across nearly all-major industry sectors. Are you or your spouse one of the 8.1% Are you worried about joining this group? If you own a small business or are thinking about starting that small business then you need to understand how COBRA can have a dramatic impact on your financial future. Here are 7 things you need to know right now!

1. What is COBRA continuation health coverage? Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. The law amends the Employee Retirement Income Security Act, the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.

2. What does COBRA do? COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves.

3. Who is entitled to benefits under COBRA? There are three elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

Qualifying Events for Employees:

Voluntary or involuntary termination of employment for reasons other than gross misconduct

Reduction in the number of hours of employment



Qualifying Events for Spouses:

Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct

Reduction in the hours worked by the covered employee

Covered employee’s becoming entitled to Medicare

Divorce or legal separation of the covered employee

Death of the covered employee



Qualifying Events for Dependent Children:

Loss of dependent child status under the plan rules

Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct

Reduction in the hours worked by the covered employee

Covered employee’s becoming entitled to Medicare

Divorce or legal separation of the covered employee

Death of the covered employee

 

4. How does a person become eligible for COBRA continuation coverage?

To be eligible for COBRA coverage, you must have been enrolled in your employer’s health plan when you worked and the health plan must continue to be in effect for active employees. COBRA continuation coverage is available upon the occurrence of a qualifying event that would, except for the COBRA continuation coverage, cause an individual to lose his or her health care coverage.

5. What Do I do if I Don’t Want To Take COBRA? Group Health Plans are very benefit rich. This means that you probably have dental, vision, low co-pays for doctor visits etc. Things you take for granted. Your employer if often paying 80% or more of your premium and your portion of the premium is just 20% or less. You don’t realize the true cost of your health plan until you qualify for COBRA and get that letter from your HR Department that gives you STICKER SHOCK. Why? Because you see that your new monthly premium could be up to 400% more that what was being pulled out of your paycheck. What do you do? You get on the computer and start looking for Health Insurance quotes and see a lot of quotes that look appealing as an alternative but you are comparing apples and oranges.

Here are three main points that are not clear when you look at these computer quotes

First of all, Group Plans in Georgia are “guarantee issued” which means that everyone MUST be accepted. Individual plans go through an underwriting process, so you have to qualify and may not be accepted.

Most insurance carriers usually decline major pre-existing conditions like diabetes, cancer and heart disease. Minor pre-existing conditions like weight, high blood pressure and elevated cholesterol etc. are rated up which means you’re charged more. This underwriting process can take up to a month, if done properly.

Also many of the benefits you take for granted on your benefit rich group plan are extras or “riders” with individual policies that increase your premium.



So what are my alternatives if I just lost my job?

6. How Does The American Recovery and Reinvestment Tax Act of 2009 affect COBRA and save me more money? The Act provides a 65% government subsidy to employees who are involuntarily terminated between September 1, 2008 and December 31, 2009. The premium reduction relates only to premiums for the coverage period beginning after the new law was enacted on February 17, 2009. The law does not allow reimbursement of premiums for coverage periods beginning before February 17, 2009. Qualified individuals can, however, receive the premium subsidy going forward, for up to nine months. So if you are already on COBRA you can get this subsidy for up to nine months. Also if you declined COBRA during this period, you can now enroll in the subsidized coverage. This a great deal if you are planning on finding another job that will provide Group Health Insurance because you only have to pay 35% of the COBRA costs and can keep your benefit rich coverage for up to 18 months.

BUT……

What If you are planning to focus on your business full time now, rather than get another job? Then you really need to look much closer at individual plans.

7. How does buying your own portable individual health plan protect your financial future? Let me tell you a story about how one of the most financially savvy guys I know got the surprise of this life after riding his bike one day in Florida. I lived in South Florida and played tennis with a friend who retired from a Fortune 100 Company when he was 49 years old. After many years of hard work he took early retirement and built his dream home in Florida. After several years his wife became bored and wanted to move to Atlanta. They bought into one of the most prestigious new developments in metro Atlanta. Six months after construction began my friend was riding his bike and got shortness of breath. He called a tennis buddy and neighbor who was also a cardiologist and the doctor said, “Come to my office and let me check you out”. The cardiologist sent him straight to the hospital and discovered that one of my friend’s coronary arteries was narrowed and a “heart stent” was inserted to relieve the condition. Within a few days my friend was busy playing tennis and riding his bike. Thinking about his upcoming move to Georgia, my friend decides to call his Health Insurance Company to move his plan from Florida. Mind you this was not some fly-by-night company but one of the best-recognized names in the insurance industry today! You can imagine his surprise when this insurance company told him that he was “UNINSURABLE” in the state of Georgia. What happened? When he retired my friend elected COBRA and when he moved to Florida took an individual plan in Florida. He assumed that because the insurance company had such a big name that is was a national company but it WAS NOT so he could not get health insurance, at any price, in Georgia because he had this MAJOR pre-existing condition of heart disease.

You might be subject to similar consequences or worse if you get sick or have a major accident during the period you’re on

COBRA. To avoid this type of situation or worse you need to work with a licensed Health Agent who specializes in Small Business Entrepreneurs.

 

If you had been receiving health insurance coverage through COBRA, termination of your benefits is an inevitable eventuality that you must most surely face. Until now, you had been enjoying the benefits of continued health coverage from your former employer. But COBRA, as mandated by government law, is intended only to help ex-employees “bridge the gap” until you find new health insurance coverage on your own.

If you have not been able to obtain insurance coverage through a new employer by the time COBRA termination of coverage s set to occur, then you will need to explore other options. If you are married, perhaps you may need to become a dependent on his or her employer’s insurance plan, if available.

Obtaining your own private, individual insurance plan is your other option.

As you may have no doubt already discovered first-hand, individual health insurance can be significantly more expensive than the group insurance plans offered by employers. You have experienced this already first-hand with COBRA, having to pay the entire cost of insurance coverage on your own. And you will experience this again when your COBRA termination takes effect and you must go out shopping for private insurance.

COBRA termination can be a time of uncertainty if you have always been accustomed to receiving insurance benefits through an employer.

The good news is that COBRA termination may actually end up saving you money. When it comes to shopping around for private health insurance, you have a much greater array of options in terms of health plans to choose from. In some cases, these may end up saving you money over what you were paying under your COBRA insurance plan.

Not sure which option is right for you? Compare health plans now and get a free insurance quote.

COBRA Termination – How to Maintain Health Coverage After COBRA Expires