Legislature Expands Federal COBRA Credit to Out of Work Small Business Employees

Assembly bill helps laid off employees afford health insurance
March 19, 2009
Assemblywoman Rhoda Jacobs (D-Flatbush) announced the Assembly passed a bill that will subsidize 65 percent of an individual’s or family’s Consolidated Omnibus Budget Reconciliation Act (COBRA) premium for those who have been or will be involuntarily terminated from their jobs at small businesses between Sept. 1, 2008, and Dec. 31, 2009 (A.6740).

“Employees of small businesses deserve the same opportunities as those who work for larger companies. In this difficult economic climate, this subsidy will help laid-off employees of small businesses get the health coverage they need,” Jacobs said. “We can’t ignore the needs of a large portion of working New Yorkers just because they work for small companies. Everyone, regardless of where they work, needs access to health insurance.”

The measure builds on a program in the federal American Recovery and Reinvestment Tax Act of 2009 (ARRA) to subsidize 65 percent of COBRA premiums for those laid off at businesses with more than 20 employees. The participant pays the remaining 35 percent of the premium cost for nine months. The subsidized period would be followed by any applicable unsubsidized coverage.

“This subsidy will hopefully see families struggling with unemployment through the worst of the recession,” said Jacobs. “Families without health insurance risk having a medical situation that could bankrupt them. The Assembly’s bill helps reduce the number of employees who have been laid off from experiencing such a gamble.”

Under the new provision, approximately 240,000 more New Yorkers will be eligible for the health insurance coverage credit following involuntary termination of employment from a business with 20 or fewer employees.

COBRA allows workers and their families who lose their health benefits – because of voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce or other life-altering events – the right to continue their health benefits provided by their group health plan for a limited period of time.

Typically, COBRA participants are required to pay the entire premium plus a 2 percent surcharge. The average COBRA premium is $400 per month for an individual and $900 per month for a family of two or more. This translates into $260 per month in savings for individuals and $585 per month for families.

To be eligible for the COBRA premium reduction, workers must be involuntarily terminated from their jobs between Sept. 1, 2008, and Dec. 31, 2009. For those who did not opt to make COBRA payments prior to implementation of the credit, the measure provides a second opportunity to elect coverage. The group insurance administrator will be required to notify qualified individuals of the subsidy option within 60 days of Feb. 17, 2009, and the interested party must elect coverage within 60 days of when notice was provided.

Subsidized COBRA coverage will cease if or when a participating individual becomes eligible for health insurance through new employment, or becomes eligible for Medicare.

“The mini COBRA law will allow those who qualify, regardless of the size of the company they worked for, to pay significantly less for health insurance,” said Ms. Jacobs. “It’ll provide meaningful relief to those who have been struggling to pay the full cost of their premium, and it’ll also relieve those who previously opted not to continue their insurance through COBRA because they couldn’t afford it before.”