In Denver, Colorado President Barrack Obama signed the American Recovery and Reinvestment Act into law people have been clamoring for details as to how this new program will work.
The government will pay former employers of eligible employees 65% of the total cost of the premium for the first 9 months. Eligible employees include those covered by employer sponsored group insurance plans for both COBRA and under Colorado’s State Continuation Benefits.
So that means that the beneficiary (ex-employee) is responsible for 35% of the premium for up to 9 months and 100% after that. However, please note that if an beneficiary develops a pre-existing condition during the 9 month period and has not found new employment then it may be very difficult for them to medically quality to get onto a lower cost individual health insurance plan.
The 35% subsidy will expire at the earlier of 9 months, the date the beneficiary is eligible for group coverage or Medicare or the end of the maximum required period of continuation under COBRA. The beneficiary most advise their former employer in writing if they become eligible for coverage under a group health plan or Medicare. The government will impose penalties of up to 110% of the subsidy amount for failing to advise their former employer of eligibility for a group health plan or Medicare.
Requirements and Timing: To be eligible for the subsidy the beneficiary must have been involuntarily terminated from their employment. They also must have become eligible for COBRA between September 1, 2008 through December 31, 2009. People that did not elect COBRA can elect it retroactive back to the date that they would have first elected COBRA. If already covered by COBRA during this period the former employers are responsible for either refunding or crediting the subsidy amount against future insurance premiums payments.
If the your modified adjusted gross income is more than $125,000 a year or $250,000 a year, if filing jointly then you may not be eligible for the full subsidy. If your modified adjusted gross income is more than $155,000 a year or $290,000 a year, if filing jointly then you may not be eligible for any subsidy. The subsidy is not considered income as long as the beneficiary meets the income tests.
The beneficiary’s former employer will collect the 35% premium payment from the beneficiary and the 65% from the government.