We certainly do love acronyms, particularly when it comes to tax laws and insurance. These provisions really do have something for us to love in the way of helping folks that are laid off or involuntarily terminated from their jobs.
One of the most exciting parts of the American Recovery and Reinvestment Act, signed into law by President Obama, provides a subsidy of 65% of the premium for Assistance Eligible Individuals. This is a tremendous step toward keeping people insured during these tough economic times. This subsidy applies to employees AND dependents. In many cases, the active employee’s subsidy wasn’t as high as this. Further, many folks try to qualify for individual insurance and are either rated (charged a higher premium) or declined because of pre-existing conditions.
In my experience so far, many people are finding that they can now continue their benefits at a lower cost than buying an individual plan. They don’t have to worry about the transition time while they look for a new job or try to qualify for benefits. Following are the details.
COBRA, or Congressional Omnibus Budget Reconciliation Act, is the FEDERAL law that allows employees to continue benefits if there is a qualifying event such as termination, reduction in hours, death, divorce, etc. Benefits can be continued for 18-36 month depending on the event. CAL-COBRA is the STATE version that essentially extends the provisions to all qualifying events for 36 months if the company is domiciled in California. Both allow the beneficiary to continue by paying the full premium plus a surcharge of 2% or 10%. Federal COBRA applies to employers with 20+ employees and is administered by the employer or an outsource vendor. Cal-COBRA is administered by the insurer and applies to those with fewer than 20 employees. IF the company is based in California and has more than 20 employees, Cal-COBRA kicks in after Federal is exhausted. Many people miss this part.
The final notices for the new ARRA subsidy were released by the Department of Labor on March 19, so it is likely that many folks will be receiving notices soon. It is important that they read the notice to see if they qualify. Notices will go to folks who have an involuntary termination on or after Sept. 1, 2008, so it’s very important to pay attention to these notices. Even if they did not elect originally, they will have another option. The subsidy was effective March 1 and will continue for up to nine months.
Margaret R. Beck owns and operates Affiliated Benefit Services at 1348 Market St., Suite 208 in Redding where she is a licensed CLU (chartered life underwriter), ChFC (chartered financial consultant) and CEBS (certified employee benefit specialist). She may be reached at (530) 225-8583 and mrb1348@gmail.com
