The new stimulus-plan law requires the government to subsidize laid-off workers on COBRA for the nine months, starting March 1, to the tune of 65% of the cost, but employers have to pay the subsidy upfront.
“Employers will get the money back, but have to give the government a short-term loan,” says Jim Edholm, president of Business Benefits Insurance in Andover, Mass.
“Employers have to get ready now to start administering the subsidy, which starts in less than a week,” he says.
COBRA is the law that lets laid-off or terminated workers stay on their ex-employer’s healthcare plan. They used to pay the entire premium out of pocket. Under the new law:
* The employer must pay the 65% to the government and then deduct that as a credit against payroll and income taxes withheld from employees. So a $1,300 monthly premium would require the employee to pay only $455 — the company first and then the government later pays for the remaining $845.
* The law is retroactive to September 1, 2008, and the employer must reach out to both those who took COBRA at that time and to those who didn’t take it.
* There will be a special "open enrollment" for those who are eligible for COBRA but didn’t take it. This lets them join at 35% of the cost.
More details are found on Edholm’s benefits blog at http://bbibenefits.wordpress.com/2009/02/17/more-details-on-stimulus-act-cobra-requirements/.