The COBRA subsidy was a component of American Recovery and Reinvestment Act passed in February 2009.  The key component of the program is that the government will pay 65% of the cost of your COBRA insurance premiums for nine months.  (Normally, workers who elect COBRA coverage pay 100% of the cost of premiums.)

In its current form, the COBRA subsidy will expire at the end of December 2009.

Two groups of people will be affected by this expiration:

• Those who began receiving the subsidy when it first became available (i.e. March 2009)
• Those who become unemployed during December 2009 or later

Unless the subsidy is extended, both groups will be required to pay the full cost of COBRA premiums, which average $400 per month for individuals and $1,200 per month for families.

New Legislation

Fortunately, there are currently two bills in Congress that would extend the current COBRA subsidy.

HR 3930 – Proposed by Representative Joe Sestak in the House of Representatives, this bill would provide the following:

• An additional six months of COBRA subsidies for current recipients
• 15 months of COBRA premium subsidies for workers laid off between January 1, 2010 and June 30, 2010

S 2730 – Sponsored by Senators Robert Casey and Sherrod Brown, this bill from the Senate offers the same features as the House bill, plus:

• The COBRA subsidy would be increased to 75% of the cost of premiums
• People who lose their health insurance because of a reduction in hours would also be eligible for the subsidy

What To Do?

If your COBRA subsidy is about to expire:

• Think about extending your COBRA coverage.  You may have to pay the unsubsidized premium for a month (or until the new legislation passes), but this will ensure that you maintain your health insurance.
• Evaluate your options for individual health insurance.

If you lose your job during December 2009

• Most companies will continue health coverage through the last day of the month of your departure.  If you are covered by your company insurance plan through the end of December, you will not be eligible for the COBRA subsidy in January.  Talk with the Human Resources department at your employer and see if you can begin your COBRA coverage immediately.  This way, you will lock in the subsidy at least the next nine months.

Also see March 2010 Unemployment Extension for further updates on the COBRA subsidy.