American Recovery and Reinvestment Act Helps with Health Insurance Premiums

On February 17, 2009, President Obama signed into law the Act which includes several important changes to COBRA.

Online PR News – 11-March-2009 – – The Federal Stimulus Package:

The federal government's economic stimulus package includes money to provide short-term help paying health insurance costs for some who recently lost jobs or who will lose jobs in coming months.

COBRA Benefits Affected by American Recovery and Reinvestment Act

Who is eligible for the subsidy?

- With this program, individuals pay 35 percent of the health insurance premium. The previous employer or health insurance company pays 65 percent.

- This subsidy is good for up to nine months for those who worked for an employer with 20 or more employees and are eligible to keep their employer plan under COBRA.

- This subsidy is good for up to six months for people who worked for a small business with fewer than 20 workers and are eligible to continue their employer plan through the state continuation program.

- The 65 percent paid by the employer or health insurance company is reimbursed as a credit against their payroll taxes or as a refund.

COBRA Background

COBRA requires group health plans to offer certain individuals, who would otherwise lose their group health plan coverage as a result of a specific qualifying event (such as employment termination or certain changes in family status), the opportunity to continue their group health plan coverage for a specified period of time at applicable group rates.

The definition of qualified beneficiary includes:

- the covered employee

- the covered employee’s spouse (as defined by federal law), and

- the covered employee’s dependent children (as defined by the plan)

Qualified beneficiaries have separate election rights under COBRA. Therefore, even if the covered employee does not elect COBRA, a covered spouse or covered child of the involuntarily terminated covered employee will qualify as an AEI.

- This subsidy also applies to healthcare continuation coverage if required by the state.

Income Limitations

There are income limitations on modified adjusted gross income that exceeds $25,000 (for joint return filers) or $125,000 (for all other filers) are not eligible for the full premium subsidy. However, they may be eligible for a portion of the subsidy.

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