MONEY

Stimulus Softens COBRA’s Bite

Argue all you want about the job-creating powers of the stimulus bill over the long haul, but take note that it contains a major benefit for many laid-off workers right now.

Inside the American Recovery and Reinvestment Act of 2009, signed into law Tuesday, is a temporary 65% subsidy toward group health insurance premiums for laid-off employees and their families.

Although this does little to mend America’s health-insurance safety net, it’s still a good deal. Under the longstanding law known as COBRA, if a firm has at least 20 employees and offers group health insurance, laid-off workers and their families can stay on the group plan for up to 18 months after they leave. They catch is, the ex-worker has to cough up the full monthly premium—not just the portion he or she paid while employed, but the share the employer was paying, too.

And that’s a lot of money. According to the Families USA Foundation, the average monthly COBRA premium for individual coverage is $388, or about 30% of monthly unemployment benefits. The monthly COBRA premium for family coverage is $1,069, or about 84% of benefits. Reduce that premium by 65%, thanks to the stimulus bill, and you’re saving $695 a month.

Some limitations of the subsidy, which comes in the form of a lower premium: It lasts for only nine months. It applies only to people who are laid off between Sept. 1 of last year and Dec. 31 of this year, and who make less than $125,000 individually (or $250,000 for families). It doesn’t apply if your employer has gone out of business. If you’ve already started paying for COBRA, you won’t get any credit or refund for what you’ve already paid. On the bright side, if you were laid off in the designated time period but missed your 62-day window for taking COBRA, you’re allowed to be eligible again.

One last caveat. Even with the 65% discount, it may be possible, if you’re young and healthy, to get a better deal buying health insurance on the individual market. To research that possibility, talk to a health underwriter (find one through nahu.org) or check out the site ehealthinsurance.com.

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