Health Insurance Relief for Laid Off Workers Thanks to Stimulus Package

My wife Celeste is a bookkeeper by trade and as a result receives a lot of publications that, quite frankly, make my eyes gloss over.  However, today she forwarded me a newsletter from the American Institute of Professional Bookkeepers that contained an article about "hidden traps" in the new stimulus law that definitely had my eyes wide open.  Here's part of what the article said:

The new law includes a 65% federally funded COBRA continuation subsidy that lasts up to 9 months for workers (and their families) involuntarily terminated from Sept. 1, 2008-Dec. 31, 2009. The subsidy terminates when the former employeeis offered employer-sponsored health care coverage by a new employer; orbecomes eligible for Medicare; or has COBRA coverage that has expired.  
Notify within 60 days of Feb. 17 former employees involuntarily separated between Sept. 1, 2008-Feb. 17, 2009. Notify those who elected COBRA that they are entitled to a lower premium starting in the first coverage period after Feb. 17. Notify those who rejected COBRA that they have 60 days to elect COBRA and receive the subsidy. You can let former employees choose a less expensive plan. No subsidy is available to former employees whose income is over $125,000 a year or a family income over $250,000 a year, but employers are not required to monitor for the income phaseout.

Later on the article mentions that the employers are responsible for paying 65% of the health benefits up front and then getting reimbursed by the federal government by reducing their federal income tax contributions.  If the amount of healthcare subsidies exceed what the company owes in taxes then the company will have to apply for a reimbursement from the US Treasure, and there's no telling how long that will take.  Can we say cash flow problems?  Also, the first subsidies can come due as soon as March 1, 2009 so companies literally need to move on this now.

If you've been laid off and are paying COBRA or paying for insurance as an individual this could save you some serious money.  For instance if you're using your employer's health plan via COBRA to cover your family, which means you're paying 100% of the cost, then you could easily be spending over $1,000 per month for your premiums.  With the government picking up 65% of the tab that payment drops to $350 which is some serious savings.

Keep an eye out for a notice from your former employer and if you don't get one within about 45 days then contact the human resources department or whoever at the company is responsible for administering benefits and ask them to send you more information.


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