Help from the American Recovery and Reinvestment Act

Specifically, under the Act, people that had lost their jobs and were eligible to sign up for COBRA would receive help in paying the premiums for their COBRA medical insurance coverage. The money from the federal government would cover 65 percent of the cost of the worker’s monthly COBRA premiums. This was effective for people who became laid off between September 2008 and December of 2009.

A Program Extended

This program has been extended by Congress a number of times since the original bill passed. Most recently, it was extended on April 15. On that day, the President signed legislation that would not only extend the unemployment benefits that many workers have been receiving, but also provide additional help for COBRA premiums.

Specifically, this legislation extended the COBRA premium subsidy for people that are involuntarily terminated from their jobs all the way up through May 31 of this year.

There is talk, however, that Congress may continue to extend these benefits. It’s suspected that the benefit may continue all the way through the end of the year.

Understanding How COBRA Works

It’s important to understand how COBRA works. If a company has more than 20 employees and offers medical insurance, they are required by federal law to allow you to continue to participate in their group insurance program for a minimum of 18 months after you leave the company.

If that happens, you have to pay for the premium costs yourself. That is likely going to be as much as $400 for an individual, or more than $1,000 for a family. In fact, the average cost for a family was $1,111 in 2009. The federal subsidy reduces the cost of that premium to $389. This still makes it a challenge to pay for COBRA, but it is much easier than it was before the federal assistance was passed.

Photo via RussBowling

Currently, those benefits are set to expire. As it stands right now, no one who becomes unemployed after December 31 of this year will be eligible for the subsidy. Still, there are advocates in Washington who are lobbying for an extension of the subsidy. Right now, there are several bills in congress that will expand the program into 2010, and there are also bills that may extend the limit on these payments from just nine months to as long as 15 months.

It isn’t clear right now what form the COBRA subsidy extension will take. What is fairly certain is that Congress will pass some sort of bill after the holiday recess. There is some talk that the bill may provide back payments to those whose subsidy already has expired, but there is also talk that the only change will be extending the subsidy to folks who lose their job after December 31.

If you’re struggling to make your medical insurance payments through COBRA and don’t yet know what the future of the COBRA subsidy will be, you may want to go ahead and pay the full premium for a month while you wait to see what happens in Washington. While this can be a financial hardship, it’s much safer to stay on COBRA so that you don’t run out of options. If you stop paying your COBRA policy, you may not be allowed to go back on the program even if Congress extends the duration of the subsidy.

As always, you should compare your coverage options between COBRA and private medical insurance. You might be surprised to learn that you have a number of different options available to you. In many cases, COBRA is much more expensive than a policy you could take out on your own.

In addition, there are a number of state, local and federal programs that can help folks out with their insurance situation, especially if you have children and are unemployed. Programs like Medicaid can help struggling families make sure their medical needs are covered.

But if you drop COBRA now and buy an individual policy, you run the risk that you may not be allowed to go back on COBRA if Congress extends the subsidy.

Delaying a decision on COBRA is also a good idea because Congress may pass health-care reform in the next few months. Even though many provisions won’t take effect until 2013 or 2014, a few key items could affect people right away — such as provisions that could extend COBRA beyond 18 months until 2013 and changes to maximum coverage limits offered by health-insurance policies, says Langan.

By all means, reassess your options in a month or two. If Congress does not extend the COBRA subsidy and you and your spouse still don’t have jobs with health-insurance benefits, look for a better deal on your own, if you’re healthy. You can shop for individual health-insurance quotes from many companies at eHealthInsurance.com, or get help from a health-insurance broker at www.nahu.org.

Photo via DieselDemon

Repository: The New York Public Library. Photography Collection, Miriam and Ira D. Wallach Division of Art, Prints and Photographs.

While politicians debate the state of medical insurance in the United States, millions of families find themselves with their primary breadwinner unemployed and no obvious way to get medical insurance. One day this may change, but for now it’s a real problem for many families. During a time of economic hardship and recession, more and more families face this problem.

The good news is that, for many families, there is medical insurance available right now. There are several possible ways to get medical insurance when you’re unemployed:

1. Look into COBRA. If you have a severance package, or if you are able to collect unemployment insurance payments, you may still have some money coming in. You may be able to participate in COBRA. COBRA is so named because of the Consolidated Omnibus Budget Reconciliation Act of 1985. This act made it so that people who leave a company, whether they quit, are fired, or are laid off, can purchase group health insurance benefits. Recent changes to medical insurance law now make COBRA more affordable than ever.
2. Check out short-term medical insurance options. If there’s a good chance you’ll be going back to work within the next year, this might be your best option. These kinds of insurance policies are specifically designed with unemployed folks in mind. They’re designed to be within your budget. They may not be the best coverage, and will often have high co-pays, but they will often meet your basic medical insurance needs, at the very least.
3. Look into a public option. While there is no national public option for medical insurance, most states have some form of low-cost or free medical insurance. In some states, the programs scale with your income. If you have no income whatsoever, you may be eligible for medical insurance paid for by the state through its Medicaid program. In other cases, you may be able to purchase a low-cost group plan.
4. Ask about children’s coverage. At the very least, all states provide for medical insurance coverage for young children in low-income families. Talk to your state’s insurance department or Medicaid office to find out if this applies to your children. While you and your spouse may or may not be eligible, at least your kids will have access to health care.

Look into small business groups. Many local small business groups, such as local Chambers of Commerce, will have access to a group medical insurance plan. You may be able to participate in this kind of a plan, as well

COBRA is the federal law that requires insurance companies to offer the same group medical insurance coverage to employees after they leave a company for a certain amount of time. When you have COBRA insurance, you have to pay the full premium costs which can be extremely costly depending on the type of coverage and the overall group insurance plan. Unfortunately, medical insurance companies are only required to offer COBRA coverage for a certain amount of time.

COBRA is a little more affordable today than it has been in the past, thanks to a certain government program. For example, last February’s economic stimulus package provides a subsidy of 65 percent for the COBRA premiums for workers laid off between September 1, 2008 and the end of 2009. For 18 months after being laid off, workers can pay for just 35 percent of the cost of their COBRA premiums and the federal government will pay the rest.

Eventually, you will run out of eligibility for COBRA coverage. When you do, there are some things you’ll need to consider if you’re still not employed or if you’re employed in a situation where medical insurance is not provided for you or your family. Here are some things to remember:

• Don’t get rid of COBRA until you’ve got another source of coverage lined up. Make sure you don’t have a lapse in coverage between COBRA and your new source of medical insurance. Keep in mind that you can search for private medical insurance while you’re covered by COBRA without any penalty.
• Look into income-based state-run programs. Medicaid is there for children and parents in families that are at a certain income level. If you haven’t yet found employment and don’t have a reliable source of income, this may unfortunately be your best bet.
• Consider buying different medical insurance coverage for different family members. Your children, for example, may qualify for the SCHIP program, which provides federal money to cover insurance for families who don’t qualify for Medicaid but also cannot afford to buy private medical insurance.
• Consider a part-time job. Many companies now offer medical insurance to their part-time employees. This can often be less expensive than COBRA.
• Buy a short-term plan if you’ll soon be eligible for Medicare, or if you know you’ll be returning to work soon.