Prepare yourself for employers enrolled in COBRA Surge

 

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16 February 2009

NEWS, Pg 1

825 words


Employers prepare COBRA increase registered

Jerry Geisel



WASHINGTON-Employers will have to scramble to comply with federal legislation providing a federal subsidy of COBRA premiums for health insurance for employees made redundant.

Employees who were laid off since September 1, 2008, by 31 December 2009, will be eligible for a federal grant of 65% of their premiums under COBRA provisions in the bill of massive economic stimulus package.

The House on Friday gave final approval to the legislation, HR 1, and the Senate should pass the bill Friday or weekend.

The beneficiaries would be entitled to the subsidy for a maximum of nine months or until, in order to be eligible for coverage from another employer plan or Medicare. The grant, however, would not be available for people with annual incomes exceeding $ 125,000 or couples with annual incomes over $ 250,000.

The subsidy is estimated to cost the federal government nearly $ 25 billion a year could contribute up to 7 million people unemployed and their families to maintain health care coverage, according to an estimate the Joint Committee on Taxation.

With the grant from beneficiaries to pay about one third of the COBRA premium is often a monthly cost of about $ 400 for individual coverage and $ 1,200 for family coverage, employers with many employees are dismissed if expect a sharp increase in registered.

`` The takeup rate will skyrocket,''said Andy Anderson, of counsel with law firm Morgan, Lewis & Bockius LLP in Chicago.

COBRA is often a big money-loser for employers. Due to the high cost of coverage, now opt for COBRA generally to use or use medical services. Accordingly, it is not uncommon for employers to pay debts of $ 1.50 for each $ 1 in COBRA premiums they collect.

With the government picking up nearly two thirds of the premium tab COBRA, COBRA risk pool is certain to improve, if the premiums paid by employers are not yet equal opportunities claims, experts say.

`` The effects of selection, while perhaps not as great as before, is still going to be a problem,''said Paul Dennett, senior vice president of the American Benefits Council in Washington.

A modest improvement in the premium to loss ratio is certain to be offset by the influx of new beneficiaries to opt for coverage.

`` At the end of the day, it will be very costly for employers,''said Mark Ugoretz, chairman of the ERISA Industry in Washington.

The challenge for employers will comply with the requirements that kick in almost immediately.

Under the legislation, grants will be available starting March 1. This means that employers must inform eligible beneficiaries of the development of what they have to pay for COBRA and send further representations of the premium.

Some recipients, unaware of the change in the law, will be overpaying. Under the legislation, employers will have the first choice is to provide a refund or credit may be used against future payments.

Another major challenge for employers will be followed by former employees laid off since Sept. 1, 2008, who refused COBRA coverage at the time. The law requires employers to notify people that they have a right to opt for COBRA coverage subsidized. The notice must also specify that recipients have 60 days to opt for coverage.

In addition, the employer shall inform the beneficiaries that their right to the subsidy will end when they become eligible for coverage from another employer. It is a change of coverage in nonsubsidized COBRA COBRA eligibility ends when the recipient actually join a new employer's health care system or after 18 months of receiving coverage.

By law, beneficiaries of grants for collection, they are no longer eligible to be required to repay the government for 110% of the grant received.

Few, if any, pieces of legislation of this size, the cost of stimulation is nearly $ 800 billion have left so quickly by Congress. The legislation was introduced shortly after President Obama takes office. President Obama, noting the deepening recession, said quick action is crucial and legislators responded.

COBRA If the subsidies were part of earlier bills introduced in the House and Senate, the details changed midstream. The most significant change was the Congress speakers abandon a provision strongly opposed by groups that have allowed employees who worked 10 years for an employer and employees aged 55 and over to retain the right to COBRA for Medicare at age 65.

In addition, legislators fiddled until the last minute with the size of the federal grant. In fact, a summary of the final agreement, issued by House Speaker Nancy Pelosi, D-Calif., Said that the premium subsidy is 60%. A few hours later, a summary of legislation prepared by the Ways and Means Committee and Senate Finance Committee said that the premium subsidy was 65%, a sign of the 11th hour of tinkering by the legislature.

Art Legend: Cobra expansion since 1986

20 February 2009

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