Health Insurance, COBRA and ARRA

With the stroke of a pen, President Obama completely changed the landscape involving employer sponsored group insurance. When you add in proposed changes in the tax laws and the union “card check” revisions, it would appear that Washington is trying to single-handedly dismantle small employers.

COBRA on the federal level applies to employers with 20 or more employees but each state has their own rules which apply to smaller employers. In Georgia, employers who offer group health insurance and have at least 2 employees are required to comply with mini COBRA laws.

When you lose your job, you have a right to continue the group insurance plan under COBRA laws. Until now, you were responsible for paying the COBRA premium.

All that changed with the so-called stimulus bill which includes ARRA . . . the American Recovery and Reinvestment Act. ARRA requires employers to subsidize your COBRA premium by paying 65% of the cost for up to 9 months. The employer can apply for a credit against payroll taxes to offset the cost of subsidizing your premiums.

Sounds great to the folks in Washington who have never run a business. The practical side is a nightmare.The truth is, if you have lost your job for something other than cause, you probably lost your job because your employer can no longer afford to keep you on their payroll. Business revenues are down, profits are being squeezed, costs must be reduced, and as much as your employer may like you as a person they can no longer afford to keep you.

If they cannot afford to pay your salary and benefits there is a good chance they cannot afford to pay your COBRA premium even with a tax credit. The cost of compliance, reporting, audits, etc. might just be too much for many employers.

The likely result is, your employer sponsored health insurance is in jeopardy. I would expect many employers to drop group health insurance rather than trying to deal with the additional cost of a time honored employee benefit.

If you are on COBRA now, and qualify as an AEI (Assistance Eligible Individual), the future of your coverage may be in jeopardy. If your former employer terminates the group plan, your COBRA goes away.

If you are currently covered by an employer health insurance plan, and especially if you work for a small employer, there is a good chance the plan will be discontinued at some point in the future.

If you want to get into the nitty-gritty of ARRA, here is a link.

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