Stimulus Bill Helps Laid-off Workers Keep Their Group Health Insurance

Prepared by Jill Hanken, Attorney, Virginia Poverty Law Center, 804-782-9430, jill@vplc.org

The new American Recovery and Reinvestment Act (ARRA) provides a subsidy to help involuntarily unemployed workers keep their employer-based group health insurance coverage. This law helps certain workers who qualify for federal COBRA coverage. In April 2009, the Virginia General Assembly adopted "Mini-COBRA" legislation to also allow employees in small businesses receive the new federal subsidy.

What is COBRA? COBRA is the federal law that allows people who leave jobs in businesses with 20 or more workers to continue receiving health insurance through their former employer's health plan, generally for up to 18 months (sometimes longer). The right to continue coverage applies to both workers and their dependents. Normally, people must pay the full cost of premiums plus a small administrative fee of up to 2% of premiums. The ARRA provides a 65% subsidy for up to nine months to certain laid-off workers to help them pay for federal COBRA benefits.

What is Virginia's "mini-COBRA" law? For small businesses (with 19 or fewer workers) Virginia Code §38.2-3541 allows only the possibility of a 3-month continuation of health insurance coverage - and only if the worker pays the entire 3 months of premiums in advance. On April 8, 2009, the General Assembly adopted the Governor's recommendation to enact Virginia Code §38.2-3541.1. This new law allows certain workers who are laid off from those small businesses to also receive the new federal 65% subsidy for nine months.

Who is eligible for the subsidy? People are eligible for the subsidy if they meet all the following conditions:

  1. They were (or are) involuntarily laid off between September 1, 2008, and December 31, 2009. [Note: People laid off for "gross misconduct" are not eligible.];
  2. They have annual income during the 2009 tax year that does not exceed $145,000 for individuals and $290,000 for joint filers;
  3. They have a right to continued health coverage under COBRA or Virginia's Mini-COBRA law; and
  4. They are not eligible for coverage under another group plan (such as through a spouse's employer) or for Medicare.

What about people who lose state or federal government jobs? They are generally eligible to continue their coverage under other laws that are similar to COBRA. They will also be able to receive the 65% subsidy.

How much does the subsidy pay? The subsidy pays for 65% of the cost of health insurance premiums. The subsidy can cover the worker and/or the worker's spouse, partner, or dependents who previously had coverage under the health plan.

How long is the subsidy available? The 65% subsidy can continue for up to nine months. It will end sooner if the worker becomes eligible for another group health plan through an employer or if their COBRA eligibility period ends.

Will people need to repay the subsidy? Individuals with adjusted gross incomes between $125,000 and $145,000 (or between $250,000 and $290,000 for joint filers) will need to repay a portion of the assistance that they receive.

How will people get the subsidy? All workers laid off since September 1, 2008 are entitled to notices from their former employers about the COBRA subsidy and how to apply and enroll. Workers must enroll within 60 days of receiving the notice.

They can choose to continue coverage for just themselves and/or for family members who were previously covered. They can also choose a cheaper health plan, if one is offered by their former employer.

They must pay 35% of the monthly premium cost directly to their former employer.

When does the assistance begin? Coverage and premium assistance can be retroactive to March 1, 2009 for people eligible for federal COBRA or April 8, 2009 for those eligible for Virginia's Mini-COBRA.

What if someone paid full premiums because they did not know about the subsidy? The individual is entitled to reimbursement of the excess amounts paid after 2/17/09 from the employer or health plan or to a credit toward future premiums.

Will people be subject to a new pre-existing condition exclusion period if they did not elect COBRA until the subsidy was available? No. The law does not count the period before assistance was available as part of a "break in coverage" that would subject a person to pre-existing condition exclusions.

Will the subsidy reduce other income-based government benefits? No. Programs such as food stamps, energy assistance, etc. that provide support to people with low incomes are not allowed to count the COBRA subsidy as income.

What if people are denied the COBRA subsidy—can they appeal? Yes. Appeals are handled through the U.S. Department of Labor and the U.S. Department of Health and Human Services. Decisions will be made within 15 days.

Where can I get more information? The information provided above is very basic information about the new COBRA subsidy. For more specifics contact: