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Stimulus bill - COBRA extensions + subsidies
Old 01-29-2009, 02:56 PM   #1
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Stimulus bill - COBRA extensions + subsidies

Hello all - any thoughts on whether these goodies will be available to voluntary retirees? All the coverage I can find equates COBRA with workers who have "lost their jobs"...
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Old 01-29-2009, 03:18 PM   #2
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As far as I can tell, it applies to laid-off employees. There seems to be a couple of aspects to this:

(1) A temporary subsidy to laid-off workers to pay 65% of their COBRA premiums. This would apply to workers laid off from September 1, 2008 to December 31, 2009. This provision seems to have decent support.

(2) A permanent provision that would require COBRA to be offered to any employee with at least 10 years of service (and ANY employee over 55 regardless of service level) -- not just for 18 months, but until they reach age 65. This means someone who is 33, has 11 years in service and gets laid off... they could stay on COBRA for 32 years. This provision has widespread opposition from business leaders and seems much less likely to pass. (For what it's worth, as I write this, I have 9 years and 9 months of service with my current Megacorp. Hope this doesn't give them an incentive to axe me -- but at least if I do, maybe Uncle Sugar will pay 65% of my COBRA...) Personally, I think the adverse selection potential of this provision is scary.
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Old 01-29-2009, 03:30 PM   #3
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As far as I can tell, it applies to laid-off employees. There seems to be a couple of aspects to this:

A temporary subsidy to laid-off workers to pay 65% of their COBRA premiums. This would apply to workers laid off from September 1, 2008 to December 31, 2009. This provision seems to have decent support.
This is interesting as my DH will be "released" from his job in a couple of months.
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Old 01-29-2009, 05:31 PM   #4
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I can't tell if they are treating this as an expansion of coverage to current COBRA-eligible people or a new benefit with different eligibility requirements. Common sense would indicate laid-off workers only. But then again common sense would not extend tax "rebates" to illegal aliens who don't pay taxes, but the stimulus bill explicitly does that...
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Old 01-29-2009, 05:45 PM   #5
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(2) A permanent provision that would require COBRA to be offered to any employee with at least 10 years of service (and ANY employee over 55 regardless of service level) -- not just for 18 months, but until they reach age 65. This means someone who is 33, has 11 years in service and gets laid off... they could stay on COBRA for 32 years. This provision has widespread opposition from business leaders and seems much less likely to pass. (For what it's worth, as I write this, I have 9 years and 9 months of service with my current Megacorp. Hope this doesn't give them an incentive to axe me -- but at least if I do, maybe Uncle Sugar will pay 65% of my COBRA...) Personally, I think the adverse selection potential of this provision is scary.
This is why we need a single payer. Saddling employers with the cost of non-employees doesn't help the employer or, in the end, the employee. In the same way that rent control turns landlords and tenants against each other, this kind of law could turn employers against their own employees, laying them off at 9.9 years, or using dirty tricks to keep them from getting into CORBA.

I was shocked at how shadily my megacorp COBRA plan was administered; the administrator failed to refund hundreds of dollars I was owed when I switched plans, even after several phone calls and letters. Only after many months went by and I dug up the CEO's contact info did it get resolved.
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Old 01-29-2009, 06:27 PM   #6
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I don't think "Saddling employers with the cost of non-employees" is a fair characterization of COBRA. The former employee pays the full cost of coverage at the employer's group rate. I do recognize, though, that a lot of COBRA participants could weight the employer's coverage pool a bit toward higher average costs...
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Old 01-31-2009, 08:08 AM   #7
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Update

I found one article on this that explicitly states that the subsidy applies only to involuntary separation, and the extension applies to both voluntary and involuntary separations.

The subsidy covers 65% of the cost for 9-12 months. The employer pays the 65%, then recovers it as a credit when submitting withheld taxes.

The extension is available to workers over 55 OR who have 10 years with the employer, and lasts until age 65.

Why is this needed if Obama plans to follow through with his campaign promise to make affordable coverage available to all?
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Old 01-31-2009, 08:13 AM   #8
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COBRA is so expensive for people that extending it without a subsidy will not be very helpful. My COBRA for a family of two is now nearly $1200 a month.
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Old 01-31-2009, 08:16 AM   #9
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I don't think "Saddling employers with the cost of non-employees" is a fair characterization of COBRA. The former employee pays the full cost of coverage at the employer's group rate. I do recognize, though, that a lot of COBRA participants could weight the employer's coverage pool a bit toward higher average costs...
That is the adverse selection problem--the cost will go up for the employer, especially small employers that already struggle to pay for insurance.

Also, some employers are partially self insured. For example, they may self insure for the first $30,000 of cost and then have stop loss insurance for the rest. These employers would have a tough time if COBRA benefits were expanded.
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Old 01-31-2009, 08:16 AM   #10
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COBRA is so expensive for people that extending it without a subsidy will not be very helpful. My COBRA for a family of two is now nearly $1200 a month.
That's the thing. The people who are helped by it are the ones who might have to pay more than COBRA in the individual market -- the older folks, the folks with chronic conditions, the morbidly obese, the ones with a history of cancer, et cetera. As a result I suspect a proposal to make people "permanently eligible" for COBRA would keep many of the worst risks in the group plan while the younger, healthier people who have subsidized the pool leave for their own much more affordable policy. It seems the adverse selection would be horrible here.
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Old 01-31-2009, 11:09 AM   #11
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COBRA is so expensive for people that extending it without a subsidy will not be very helpful. My COBRA for a family of two is now nearly $1200 a month.
Probably because it's a "cadillac" plan, as many employer-based plans are. When I FIRE'd, I was able to switch my COBRA from the "cadillac" plan to one with a high deductible. This cut the monthly premium very significantly for the 18 months I was on COBRA. If your employer offers this, I think it is something worth looking into.
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Old 01-31-2009, 11:30 AM   #12
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The only cadillac aspecit is that the deductible is $750. No dental. No glasses. Nothing fancy. Small employer (less than 100 employees) plans tend to be expensive. My former employer has about 75 employees and only offers one plan, which is typical of that size employer. A higher deductible doesn't do much for me as we use our entire deductible. When we go on the risk pool our costs will be even higher with a deductible each of $2000 per year, but with slightly lower premiums.
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Old 01-31-2009, 11:36 AM   #13
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Probably because it's a "cadillac" plan, as many employer-based plans are. When I FIRE'd, I was able to switch my COBRA from the "cadillac" plan to one with a high deductible. This cut the monthly premium very significantly for the 18 months I was on COBRA. If your employer offers this, I think it is something worth looking into.
One of the reasons I opted for the higher-deductible plan was because it would be quite a bit more affordable if I needed to use COBRA. The tax dodge ability to salt nearly $6000 a year away into an HSA helped, too.
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Old 01-31-2009, 11:53 AM   #14
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One of the reasons I opted for the higher-deductible plan was because it would be quite a bit more affordable if I needed to use COBRA. The tax dodge ability to salt nearly $6000 a year away into an HSA helped, too.
If I were working today, I would do this too. There were no HSA's when I was on the rock pile working - only Healthcare Reimbursement Accounts, which were nowhere near as good. It made sense to take the "cadillac" plan while I was working, since my employer paid most of the premium, and the part I paid was pre-tax.
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Old 01-31-2009, 12:37 PM   #15
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Thanks for the interesting feedback. I hadn't considered the self-insurance aspect and I have no idea what the rules are for passing along the cost of coverage in that case.

But surely COBRA extension is not the solution promised by the Obama campaign? The subsidy makes sense as temporary relief, but can anyone help me understand how the extension could possibly fit in with the kind of long term solution implied in the campaign?
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Old 01-31-2009, 12:53 PM   #16
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But surely COBRA extension is not the solution promised by the Obama campaign? The subsidy makes sense as temporary relief, but can anyone help me understand how the extension could possibly fit in with the kind of long term solution implied in the campaign?
It can't. Another big problem with Obama's campaign proposal is that he says he's against mandates for adults, which is a recipe for adverse selection. Without mandates, people won't buy the insurance until they have (or anticipate) large medical expenses.
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Old 01-31-2009, 03:09 PM   #17
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It can't. Another big problem with Obama's campaign proposal is that he says he's against mandates for adults, which is a recipe for adverse selection. Without mandates, people won't buy the insurance until they have (or anticipate) large medical expenses.
Especially if they know the coverage is readily and cheaply available if/when they DO need it!
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Old 01-31-2009, 03:42 PM   #18
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The most practical, low-cost first step we can take as Americans to lower health costs is to reduce our blood pressure. Do this by relaxing, and specifically by forgetting the pre-election posturing and position papers. That was then, this is now. What was said then was said for a reason, and what is being done now is being done for a reason. Breathe deep, let the pent up frustrations and bitterness leave your body. Visualize the angst draining out of your feet.

There! I'll bet our blood pressure dropped an average of 5 points. Repeat this every time someone brings up the "Hey, I thought we were going to . . ." stuff. It's not productive to live in the past.
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Old 01-31-2009, 03:53 PM   #19
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The most practical, low-cost first step we can take as Americans to lower health costs is to reduce our blood pressure. Do this by relaxing, and specifically by forgetting the pre-election posturing and position papers. That was then, this is now. What was said then was said for a reason, and what is being done now is being done for a reason. Breathe deep, let the pent up frustrations and bitterness leave your body. Visualize the angst draining out of your feet.

There! I'll bet our blood pressure dropped an average of 5 points.
Repeat this every time someone brings up the "Hey, I thought we were going to . . ." stuff. It's not productive to live in the past.
Good post, Sam, re regarding past campaign promises as just what they were--election politics. We're way past that now. And good advice re lowering our blood pressure, but unfortunately you're out of network on my insurance so you will not be reimbursed
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Old 02-02-2009, 07:19 AM   #20
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I was reading an article about the stimulus bill, it appears to me it would not cover a person wanting to retire early. I found this wording in it: I tried to remove the picture but was unable. I say this jokingly, but I think I would have to do something to get fired to qualify for the coverage. I guess the actual wording in the bill could be different since this article is dated Jan. 23 2009.
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Lawmakers Consider Dramatic COBRA Expansion - Updated - Regulatory,Legislative and Tax Issues - Life and Health Insurance News

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The bill also would require employers to permit involuntarily terminated individuals ages 55 and older to continue group health benefits until they become eligible for Medicare or employers discontinue health plans subject to coverage continuation requirements.

[Moderator edit: Photo removed per OP request]

Similarly, any involuntarily terminated worker in an affected group health plan for more than 10 years could keep COBRA coverage until becoming eligible for Medicare.
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