• Federal Stimulus Package Subsidizes Health Insurance Premiums under COBRA
  • April 29, 2009 | Author: H. Michael Bagley
  • Law Firm: Drew Eckl & Farnham, LLP - Atlanta Office
  • Among the many programs implemented in the wake of the current economic crisis is one particularly relevant for those involved with reductions in force and other job eliminations.  The federal government's economic stimulus package includes a money subsidy to provide short-term assistance paying health insurance costs for those who recently lost jobs or who will lose jobs in coming months.

    The subsidy program started Feb. 17, 2009. It provides assistance in paying monthly health insurance premiums for individuals who are involuntarily terminated and qualify under federal COBRA law to continue their employer health plan.   Under this program, individuals pay 35% of the premium. The previous employer or health insurance company pays 65%.

    This subsidy will last for up to 9 months for those who worked for an employer with 20 or more employees and up to 6 months for employees of a business with fewer than 20 workers.  The 65% paid by the employer or health insurance company is reimbursed as a credit against their payroll taxes or as a refund.  

    Those who are eligible also include employees of businesses with 20 or more employees who are laid off from Sept. 1, 2008, through Dec. 31, 2009.  In other words,  people who did not initially continue with their employer plan get a "second chance." 

    Job loss must be involuntary and not for gross misconduct. People who quit their jobs are not eligible.  The employer must be in business and still offer a health insurance plan.

    The amount of subsidy depends upon income.  Individuals with modified adjusted gross incomes of less than $125,000 may receive a full subsidy.  Individuals with modified adjusted gross income between $125,000 and $145,000 may receive a partial subsidy,  and individuals with modified adjusted gross income greater than $145,000 are not eligible for any subsidy.