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COBRA delays have left many shouldering their own medical costs
Posted by Olivera Perkins/Plain Dealer Reporter March 10, 2009 17:13PM
Categories: Real Time News, Recession

What is COBRA?COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal program that allows terminated workers to continue their group health insurance if they pay the monthly cost, usually several hundred dollars for singles and more than $1,000 for couples.

In most cases, a former employee can receive COBRA for up to 18 months. How did the stimulus bill affect COBRA? Employees who were "involuntarily terminated" between Sept. 1, 2008, and Dec. 31, 2009, may be eligible to get a subsidy on the monthly premiums, reducing their share of the cost to 35 percent.

The former employer would pay 65 percent and receive a tax credit for the amount. What does "involuntarily terminated" mean? The IRS is working to define the phrase, which was included in the legislation without a definition. What is clear so far is that the definition includes laid-off workers.

It is unclear whether workers who took early retirement or buyouts are covered. How long can I get this reduction? A person can get the lower premium for nine months and then must pay the full premium for the remaining nine months. I initially declined COBRA because I couldn't afford the premiums. Can I still sign up and get the lower premiums? Yes. Your former employer or the administrator of its health plan should notify you by April 18 if you are eligible.

You will then have 60 days to sign up. How do I apply? The Labor Department said that by next week, it will issue the letters and forms employers need to notify and enroll people.

I am eligible for my spouse's employee health insurance, but it is not as good as my benefits under COBRA. Am I still eligible for the reduced COBRA premium? No. The subsidy is only for people who aren't covered under other plans, including Medicare and a spouse's group health plan. How can I find out more? Call 1-866-444-3272 or visit www.dol.gov/COBRA

The telephones at Karen French's company haven't stopped ringing since Congress voted weeks ago to help laid-off workers pay for health insurance.
Under the economic stimulus program, laid-off workers no longer have to pay the full cost of continuing coverage with their former employers. A government subsidy will reduce their share to 35 percent. Their former employers will pay 65 percent, which they will recoup with a federal tax credit.
French is chief executive officer and managing director of Continued Care Administrators in Cleveland, which manages health insurance plans for companies, Both laid-off employees and employers have swamped her phone line, asking the same question: How do we participate?

She can offer only partial answers because the Labor Department and the Internal Revenue Service haven't completed the groundwork for the subsidy, which was supposed to go into effect March 1 for most laid-off workers.
"It has been crazy with the telephone ringing from morning until night," French said. "It has certainly been a trying time to provide answers. We're still looking for written guidance."
The insurance program is known as COBRA, which stands for or the Consolidated Omnibus Budget Reconciliation Act. Enacted in 1985, it allows terminated workers to keep their group coverage with a former employer for up to 18 months as long as the terminated worker pays the entire monthly premium. The reduced premiums through COBRA last only nine months.
William Thomas of Cleveland, who was laid off in October from the nonprofit organization where he worked, said he turned down COBRA because he couldn't afford the monthly premium of more than $1,000. He intends to take advantage of the subsidy, which will make his share of the premium about $100 less than the $450-plus his family spends on medication for his wife, Jo Ann Hayes-Thomas, a kidney transplant recipient.
"Now I don't have to worry about just trying to ride with the storm hoping that disaster didn't strike," he said.
Carmen Mayhugh of Cleveland also turned down COBRA when she was laid off from her customer service job in October because she couldn't afford the monthly premium of about $350 for a single person. "Now it would be doable," she said.
Evelyn Akers of Bedford Heights was laid off last April as a housing inspector for a private company. She doesn't think it fair that the subsidy doesn't cover workers laid off in all of 2008, since the recession officially began in December 2007.
"People in places like Ohio have been loosing jobs all year, and it is hard to find another one."
For now, few can sign up for the reduced-price COBRA, because employers are waiting for letters and forms necessary to inform former employees about the program and enroll them.
A Labor Department official said the legislation, passed Feb. 17, gave the government 30 days to come up with these documents. They probably won't be available before next week. Employers then have 30 more days to notify former workers whether they are eligible.
If laid-off workers want coverage before then, they can pay the monthly premium and then get a reimbursement or credit from the employer once the subsidy kicks in. But the Labor Department acknowledges this isn't an option for most. Monthly family premiums run more than $1,000, and an average unemployment check in Ohio totals about $1,800 for a family with three or more dependents.
"I know it's hard to [pay] with no money," a Labor official said.
Employers also have the option of making up their own letters and forms, the Labor Department said. But Robert Toth, human resources manager at Metalico Annaco, an Akron scrap metal business, said few employers will risk making up their own letters and forms and being wrong.
Toth has been frustrated by not being able to give answers to the more than a dozen people laid off from his company.
Laid-off workers and employers also are waiting on the IRS to come up with a definition of "involuntary termination," a term stated in the legislation but not defined.
Jason Rothman, a lawyer with the Jackson Lewis law firm in Independence, which represents employers, said the act also created confusion about who qualifies, such as people who took early retirement or buyouts.
"It is not clear under the act itself how to deal with these real-life situations," he said. "The perfect situation would be for the Department of Labor and the IRS to issue regulations on the COBRA subsidy spelling it out."