On Monday, the Obama Administration proposed an extension of the COBRA health insurance premium subsidies. The proposition would allow employees that have been suddenly laid of to continue being covered by their former employer’s health insurance for a certain period of time. This allows time for employees to get back on their feet and still maintain health insurance.
The extension of COBRA benefits was first begun under the Obama administration at the onset of the recession as a move to lessen the impact of job loss. The program as a whole was first created and received its name from the Consolidated Omnibus Budget Reconciliation Act in 1985.
COBRA, as conceived in 1985 covers firms with 20 or more employees. A separate coverage, referred to as Cal-COBRA applies to firms with 2-19 employees. What the Obama Administration did in terms of COBRA was to extend the 65% reduction in COBRA health premiums. This means that whereas prior to the reduction, individuals would have to pay full premiums, individuals would now have to pay 35% of premiums under the new provision.
The 65% reduction in COBRA health premiums was enacted on February 17, 2009 as part of Obama’s Recovery and Reinvestment Act. The provision was set to expire on December 31, 2009; however, because the rate of job loss is still exorbitant and the fact that many unemployed cannot find new jobs, the act was extended.
The new extension will expire February 28, 2010. For those terminated on or before that date, they are eligible to maintain the subsidy for a period of 15 months. The extension of the reduction of COBRA premiums is a great asset for Americans.
Health care coverage and insurance in America is spotty at best and rather expensive. Often, Americans opted not to even continue their coverage through COBRA because the expense was far too high. In fact, many times people found it cheaper to go through individual health insurance rather than pony up for the insurance they already had.
Under the extension, the 65% paid by the former employer is reimbursed through tax credits. It only applies to individuals, however, who were involuntarily terminated. There is also a limit as to whom can get the COBRA coverage.
For those making more than $145,000 modified adjusted gross income (or $290,000 for joint filers), than the premium reduction must be repaid in taxes. Those making anything below that amount, however, will be spared repayment.
The extension comes on the heels of Obama’s State of the Union and his move to change health care once and for all. While COBRA remains a small step, the proposed health care reform is currently trying to gain more support in order to move forward.
Written by Lani Shadduck
HULIQ.com
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