COBRA on Steroids
When I wrote about the possible extension of COBRA and subsidization of costs by the government a couple of weeks ago, few people anticipated the sweeping COBRA changes that are part of the broad economic stimulus bill that was passed by the House of Representatives.
Employers are raising concerns about a specific COBRA provision that would make companies responsible for extending health insurance to former employees age 55 and older or who worked for the company for at least a decade. The kicker is that this extension of benefits would be permanent. Employers are campaigning to remove the measure from any bill that winds up on the President’s desk for signing.
The law would apply to anyone terminated involuntarily between September of last year and the end of this year. If the stimulus bill is passed the middle of this month, which is the President’s target date, the timeframe for compliance, employers say, doesn’t allow them sufficient time to make adjustments to their administrative processes, according to a Workforce report.
If passed, the new COBRA bill would require employees who wish to extend COBRA benefits to pay 35 percent of the cost of health insurance and the employer would cover the rest. Companies would deduct that amount from payroll taxes to get their money back.
Benefits departments will be required to communicate within 60 days with eligible former employees, which could stretch capabilities at some companies; CFOs can play an important role in this and other benefits areas. According to Jeff Schwartz, Principal, Human Capital, Deloitte Consulting LLP, healthcare and other benefits challenges and opportunities should be top of mind for CFOs throughout this year. “And if we have flat growth for another short-to-medium period of time, they should take a look at overall benefit strategies instead of having a linear view of what the categories are and do a broad restructuring. The more strategic the approach, the better the opportunity of lowering the costs,” he says.
February 9th, 2009 at 6:49 pm
Some of the commentary elsewhere on the web exaggerates the potential “adverse selection” impact on health plans that could result from the COBRA extension for those aged 55 and older. It is argued that the “sickest” will elect to keep COBRA the longest, when the reality is that it is the healthiest and wealthiest who will elect to keep it. The “sickest” apply for Social Security Disability Benefits and already have the option of extending COBRA from 18 to 29 months. After the 29th month, the sickest individuals become Medicare eligible (as part of their SSDI allowance). Since the sickest participants already stay in COBRA until the 29th month, and Medicare will still kick in after 29 months (clearing the sickest participants out of COBRA at that point), the highest proportion of people electing to continue on COBRA benefits between age 55 and 65 will be those who are healthy and wealthy enough to retire. Those people will have voluntarily removed themselves from the workforce, creating room for younger workers.
February 10th, 2009 at 10:31 am
Cobra Bill Is A Must
It is imperative that this bill be passed for all the boomers that will find it next to impossible to compete with all the younger people out of work in the job hunting arena. I am 61 and have 4 yrs before I can get medicare. When my 18 mo is up I will be almost 63. Who is going to hire me and give me healthcare coverage??? We are still paying a good deal of money each month for Cobra coverage. We are just asking to be able to keep paying and keep our insurance. PLEASE pass this stimulus.
February 10th, 2009 at 10:33 am
COBRA is Just the Tip of the Healthcare Iceberg
As a columnist who follows healthcare benefits issues for Business Finance, I want to point out that these commentators are correct:: The problem of access to affordable health insurance didn’t begin last September. It’s been a problem for many years as healthcare costs have steadily climbed. COBRA extension and subsidization would only be a solution for newly unemployed people, which is just the tip of the healthcare crisis iceberg.
Laurie Brannen
February 10th, 2009 at 10:34 am
COBRA Extension
Do you have health insurance? What would be your view of the COBRA extension if you were on COBRA, unemployed, and your COBRA was expiring three months from now? I pay 100% of my health insurance, plus the COBRA premium. All I want is to continue my existing health insurance, which I pay for myself. You say, surely people can get a job within 18 months. If one is lucky one finds temporary jobs to keep one going, but those jobs do not offer health insurance. I know professionals who have been looking for months for a full-time job. These are extreme times, losing health insurance on top of the lost job inco
February 10th, 2009 at 10:35 am
COBRA Extension
My husband was laid off in April of 08 and we’ve been relying on his COBRA benefits. This Bill will only apply to those laid off after September- as if the Recession only started then. He has been actively looking for work (in construction as that is what he has been doing for thirty years, the last 18 with the same company) unsuccessfully. Did I mention he’s 52? I think this is the part where I say the poor man missed the boat on every aspect of the Stimulus Plan to help the ‘common’ man. He’s about ready to committ hari-kari. It breaks my heart. I agree with the above commenter. This DIDN’T begin last September.
February 10th, 2009 at 10:35 am
COBRA Extension
Yes I am 57 and laid Off. Very unlikely that I will ever be able to find a job that offers Health Care. This COBRA extension would be a lifesaver for myself and my wife. I do not believe the Companies that claim it costs them 143% to provide COBRA.
March 9th, 2009 at 5:40 pm
Cobra extension
Does anyone know if the Cobra extension till 65 years of age was included or taken out of Obamas spending bill that he signed on Feb. 17th?
It looks to me that the the provision was taken out at the last second but Im not sure. It would be nice to know.
Thanks
May 16th, 2009 at 5:50 pm
The gentleman who stated that the recession started way BEFORE September ‘08 was so right on the mark!! I’ve been out of work since November of ‘07 and have been paying hefty COBRA payments. Now, all of a sudden they decide September 2008 is a good month to start this package and all those people who got laid off from their jobs after September get the 35% amount to pay! I’ve been paying over $500 a month, I’m single and I live alone. Why can’t those people who have been on the COBRA get a break with the 35% to whenever the COBRA ends?? How unfair is this??!!! They want us to start spending, but how can we spend when COBRA is sucking our savings dry???? And, to make matters even worse for me, my COBRA ends in TWO weeks! Does anyone know if Obama did sign the extension for COBRA into affect yet? If he did, my former company’s HR Department will probably be giving me a run-around like they have and I had to get the Labor Department involved. When I did that, all of a sudden people were jumping all over the place. It even got the Vice President of Human Resources involved and I’m sure she wasn’t happy about that, but too darn bad!! They’re sittiing at their desks making big bucks and when you call for an answer, because you’re no longer employed by them, they don’t have the time. One person was so rude to me that when I got the Labor Department involved, the girl did the same thing to HIM and boy, when he got finished with her supervisor concerning my situation, everyone was running. You don’t mess with the Labor Department! Companies do NOT want to be on their “unfavorable” list. It’s a shame things like this have happened, but all we can do is take one day at a time, write our congressman/woman and hope and pray for the best. We need continued healthcare until we can find a job!!! And I’m sure I speak for everyone.
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