March 1 is literally around the corner -- the date when, in compliance with the new stimulus law, the government will begin a nine-month, 65% COBRA subsidy for laid-off workers.
Employers, however, have to pay the subsidy upfront, which means big changes for how they're accustomed to administering and overseeing COBRA.
“Employers will get the money back, but have to give the government a short-term loan,” says Jim Edholm, president of Business Benefits Insurance in Andover, Mass. “Employers have to get ready now to start administering the subsidy, which starts [this Sunday],” he says.
To comply with the new normal regarding COBRA -- the law that extends health insurance benefits for laid-off workers -- employers must:
* Pay the 65% to the government and then deduct that as a credit against payroll and income taxes withheld from employees.
* Reach out to employees who both did and did not elect to take COBRA upon termination, back to Sept. 1, 2008.
* Allow for a special "open enrollment" for ex-employees who are eligible for COBRA but didn’t take it. This lets them join at 35% of the cost.
Showing posts with label stimulus. Show all posts
Showing posts with label stimulus. Show all posts
Friday, February 27, 2009
Tuesday, February 17, 2009
News You Can Use: Stimulus expands COBRA
U.S. House and Senate leaders reached a deal late last week on a $789 economy-recovery package, which includes $21.4 billion for health insurance assistance for laid-off workers. COBRA-eligible workers would receive a 60% subsidy toward their COBRA premiums for nine months.
The House-Senate conference report on the stimulus plan also states that individuals with annual incomes over $125,000 (for singles) or $250,000 (for couples) would not be eligible for the COBRA subsidy. The Treasury Department would pay the subsidy and allow employers that administer COBRA benefits to receive a credit on payroll taxes.
Currently, COBRA laws require employers with more than 20 workers to allow former employees to retain their health insurance for up to 18 months. The worker pays the full COBRA premium and a 2% administrative fee. Most employers outsource COBRA administration to a third-party vendor.
Benefits experts explain that, although the government and the employee are footing the COBRA premiums, the worker still remains part of the employer's group health plan, which means that claims incurred by that individual could have an effect on the group's premium rates down the road.
"In exchange for this windfall, some employers would like to remove all COBRA member claims from the employer plans, thus establishing a new pool representative of this risk only, and ultimately be able to set rates and benefits based on the experience of the pool," says Robert Nuzzi, senior vice president of employee benefits at Cook, Hall & Hyde, a New York-based employee benefits and risk management services firm.
Despite the government subsides, COBRA coverage is still a costly feature for unemployed people, says Carl Mowery, director of the compensation and benefits practice at SMART, a HR consulting firm. For that reason, "it would seem more appropriate to have health care benefits associated with unemployment link to unemployment benefits," he asserts. --EBN Industry inBrief
The House-Senate conference report on the stimulus plan also states that individuals with annual incomes over $125,000 (for singles) or $250,000 (for couples) would not be eligible for the COBRA subsidy. The Treasury Department would pay the subsidy and allow employers that administer COBRA benefits to receive a credit on payroll taxes.
Currently, COBRA laws require employers with more than 20 workers to allow former employees to retain their health insurance for up to 18 months. The worker pays the full COBRA premium and a 2% administrative fee. Most employers outsource COBRA administration to a third-party vendor.
Benefits experts explain that, although the government and the employee are footing the COBRA premiums, the worker still remains part of the employer's group health plan, which means that claims incurred by that individual could have an effect on the group's premium rates down the road.
"In exchange for this windfall, some employers would like to remove all COBRA member claims from the employer plans, thus establishing a new pool representative of this risk only, and ultimately be able to set rates and benefits based on the experience of the pool," says Robert Nuzzi, senior vice president of employee benefits at Cook, Hall & Hyde, a New York-based employee benefits and risk management services firm.
Despite the government subsides, COBRA coverage is still a costly feature for unemployed people, says Carl Mowery, director of the compensation and benefits practice at SMART, a HR consulting firm. For that reason, "it would seem more appropriate to have health care benefits associated with unemployment link to unemployment benefits," he asserts. --EBN Industry inBrief
Thursday, January 15, 2009
News You Can Use: NBGH pushes for spending on health IT, COBRA subsidies
As Congress starts to set the details of an economic stimulus package, the National Business Group on Health on Monday outlined its health care priorities.
It recommends that the stimulus package include spending on health information technology, medical research on comparative effectiveness and subsidies for unemployed people to pay for COBRA coverage.
NBGH President Helen Darling acknowledged that these ideas could be very expensive, but also said they can revive the national economy and generate long-term improvements in the health care system’s quality and efficiency.
Health IT spending should focus mainly on small physician groups because that’s “where we are least likely to have progress” without government support, she added.
Stressing the urgency of the situation, Darling said Congress should act quickly and make compromises because “we are in a war for the recovery of the U.S. economy.” She said she’s “very optimistic about health reform” coming as a set of changes, rather than a single package.
--Leah Carlson Shepherd
It recommends that the stimulus package include spending on health information technology, medical research on comparative effectiveness and subsidies for unemployed people to pay for COBRA coverage.
NBGH President Helen Darling acknowledged that these ideas could be very expensive, but also said they can revive the national economy and generate long-term improvements in the health care system’s quality and efficiency.
Health IT spending should focus mainly on small physician groups because that’s “where we are least likely to have progress” without government support, she added.
Stressing the urgency of the situation, Darling said Congress should act quickly and make compromises because “we are in a war for the recovery of the U.S. economy.” She said she’s “very optimistic about health reform” coming as a set of changes, rather than a single package.
--Leah Carlson Shepherd
Monday, January 12, 2009
News You Can Use: Govt. may subsidize COBRA
Someone who knows someone who knows a lobbyist close to the stimulus package talks tells Workforce Management that Congress may be considering a 50% to 60% subsidy of COBRA premiums for employees who lose their jobs. The subsidy would last 18 months, the maximum time workers can maintain COBRA through their ex-employers.
One of the biggest complaints about COBRA has long been that it's too expensive -- particularly for workers who suddenly find themselves out of work and/or need to cover their entire families. However, health industry experts also lament that Americans have been sheltered from the true cost of health care and coverage, which is why COBRA induces such sticker shock.
What say you? Should the government subsidize COBRA premiums? For how long? President-elect Obama seems to lean in favor, WM reports. Do you? Comment below.
One of the biggest complaints about COBRA has long been that it's too expensive -- particularly for workers who suddenly find themselves out of work and/or need to cover their entire families. However, health industry experts also lament that Americans have been sheltered from the true cost of health care and coverage, which is why COBRA induces such sticker shock.
What say you? Should the government subsidize COBRA premiums? For how long? President-elect Obama seems to lean in favor, WM reports. Do you? Comment below.
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