Open enrollment for the ACA health insurance marketplace ends Saturday! There's still time to sign up or change your plan.
by Charlotte Huff, AARP Bulletin, March 17, 2009
If you’ve been laid off any time since August 2008 but opted to keep your former employer’s health insurance, the federal stimulus package might help you foot the bill for that coverage, at least temporarily. And, if you passed up the COBRA option at the time because of the cost, the new law gives you another chance to enroll.
Specifically, the stimulus plan provides a subsidy for up to nine months of coverage under COBRA, the Consolidated Omnibus Reconciliation Act—the federal law that extends employer insurance for laid-off employees, typically for 18 months.
Here’s how the subsidy works: For the first nine months of unemployment, you will pay 35 percent of your COBRA cost and the government will pay the other 65 percent. After that, you’re responsible for the full amount. For example, if your family’s COBRA insurance payment is $1,000 a month, you’ll pay about $350 a month if you qualify for the subsidy. “With a family of four, it’s a really big help,” says Allan Hoving, a 52-year-old online product manager, of Westport, Conn., who lost his job in January. “It takes some pressure off the finances.”
Health policy experts say that even if discounted health insurance payments are a drag on your finances, try not to pass up the opportunity. This is especially true if you don’t yet qualify for Medicare and can’t count on finding insurance coverage elsewhere.
Healthy people might be tempted to turn down coverage, says Paul Fronstin, a senior research associate at the Employee Benefit Research Institute in Washington, but a car accident, a cancer diagnosis, or other health problem might be around the corner, he says. “Once you have a preexisting condition, you’re going to be turned down for coverage,” he says. “Or the preexisting condition is going to be excluded from coverage.”
After more than 63 days without insurance coverage, a diagnosis can be classified as a preexisting condition and might not be covered under a future insurance policy.
Experts say that the older you are, the more important it is to consider COBRA, because the risk of being turned down for other types of health insurance increases with age, according to a 2006 survey by America’s Health Insurance Plans, a trade group.
The denial rate—11.3 percent across all ages—averaged 17.4 percent among those ages 50 to 54, and nearly 29 percent for those ages 60 to 64.
But COBRA is beyond the reach of some workers, whose former employers picked up 75 to 85 percent of their health insurance costs. For COBRA, those employers can charge as much as 102 percent of the insurance costs, including an administrative fee, which may explain why just 9 percent of those eligible enrolled in 2006, according to a Commonwealth Fund survey. The Kaiser Family Foundation reports that the average active employee pays 16 percent of the cost for single coverage and 27 percent for family coverage. The average employer-sponsored health insurance costs $4,704 a year for individuals and $12,680 for families, according to Kaiser.
Still, sticking with a former employer’s plan can protect you from a risky gap in coverage before you’re eligible for Medicare.
Karyn Schwartz, a senior policy analyst at the Kaiser Family Foundation, cites another advantage for those who can afford COBRA for the full 18 months: Every state is required to offer at least one health plan—even though potentially costly—for those residents who have exhausted COBRA.
Hoving, who is aggressively job-hunting, believes his networking efforts will pay off long before the nine months expires. For those not as fortunate, the subsidy will serve as a helpful but temporary Band-Aid, Fronstin says. “When you think about it, when Band-Aids come off, they hurt,” he says. “When this subsidy ends, it’s going to hurt.”
FAQ on the New COBRA Federal Subsidy
Who is eligible for the cheaper COBRA payments?
In general, to qualify you must:
Will my employer tell me if I’m eligible?
Your employer has until April 18 to let you know you are eligible to enroll. If you haven’t received notice but think you are eligible for the subsidy, call your employer to ask when you’ll get the notice and application.
If I qualify, when will my health insurance costs go down?
For most people with COBRA plans, the subsidy started March 1. Laid-off workers who pay the full amount in March or April will have the difference reimbursed or refunded as a credit.
How long will the lower payments last?
Your subsidized premium should last up to nine months unless you become eligible for Medicare or another group health plan (such as a plan sponsored by a new employer or a spouse’s employer), or you reach the end of your maximum COBRA coverage period. There’s also some possibility that Congress will extend the subsidy.
What if I can’t swing the full insurance payments while I’m waiting for the paperwork to come through?
Mail in the subsidized amount by certified letter, saying you believe you qualify, recommends Mary Ellen Signorille, a senior staff attorney for AARP Foundation Litigation.
Where can I find out more?
For more details, check with your former employer or consult the U.S. Department of Labor website. AARP also provides information on COBRA.
Is there a way to get COBRA coverage if I work for a small business?
In some states, residents laid off from businesses with fewer than 20 employees might be able to extend health coverage, sometimes called mini-COBRAs. The Kaiser Family Foundation provides more state-by-state details.
Charlotte Huff is a health and business writer who lives in Fort Worth, Texas.
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