Federal Government Subsidizing Health Care Benefits For Laid Off Employees

A new amendment to an important employment law was included in the American Recovery and Reinvestment Act, a law which you might know better as President Obama’s most recent Economic Stimulus package. Under that law, the United States government will pay 65% of an employee’s health insurance premiums for up to nine months after an employee is involuntarily fired or laid off. This new provision is part of the Consolidated Omnibus Budget Reconciliation Act (COBRA). It applies to individuals who are covered by COBRA who involuntarily lose (or lost) their jobs between September 1, 2008 and December 31, 2009. It even covers individuals who have already turned down COBRA benefits since September 1, 2008.

The government stipend toward COBRA benefits is reduced for individuals who make more than $125,000 per year and married couples who file joint tax returns and earn more than $250,000 combined. The benefits phase out completely for individuals who make more than $145,000 and for couples filing joint tax returns who earn more than $290,000 combined.

COBRA is a law that allows many employees, as well as their spouses and dependent children, to continue to receive health insurance benefits for at least 18 months (and under certain circumstances, for as long as 36 months) after they lose their health insurance coverage from an employer. COBRA allows those individuals to pay for their health insurance based on the employer’s group rates, plus a 2% administrative cost. Prior to the stimulus package, employees who elected to continue their health insurance benefits under COBRA had to pay the entire cost of keeping their medical benefits out of their own pockets. Employees who are eligible for the new government subsidy only have to pay 35% of that cost.

COBRA itself applies to individuals who are eligible for health insurance benefits from a company with at least 20 employees. However, the new government subsidy applies to individuals in states that have “comparable continuation coverage” that apply to smaller companies (often referred to as mini-COBRA laws). That includes employees in both New York and New Jersey.

Although the new government subsidy only applies to individuals who were laid off or who are otherwise involuntarily terminated, COBRA applies to employees who are no longer covered by a company’s health insurance plan because their employment voluntarily or involuntarily ends for any reason other than “gross misconduct,” or their hours were reduced. It also applies to spouses and dependent children if the are no longer entitled to health benefits from their spouse’s or parent’s employer because (1) the employee voluntarily or involuntarily left his employment for any reason other than “gross misconduct,” (2) the employee’s hours were reduced below the minimum to qualify for benefits, (3) the employee becomes entitled to Medicare; (4) the employee divorces or legally separates from his or her spouse; (5) the employee dies; or (6) in the case of a dependent child, because the child is no longer eligible for benefits under the employer’s health insurance plan.

If you have recently lost your job, or have another question about your rights under COBRA, you should contact an employment lawyer in your area to discuss who can help you understand your employment law rights.