The U.S. House and Senate will vote on a compromise $790 billion stimulus package that includes subsidies for 65% of the COBRA health insurance premiums paid by laid-off workers, under a hard-fought conference report unveiled late Feb. 12.

The final version of the American Recovery and Reinvestment Act, which followed intense negotiations between leaders of the two chambers, is smaller than either the $819 billion stimulus passed by the House or the $838 billion package cleared by the Senate. Completion of the conference report for H.R. 1 sets up a planned Feb. 13 House vote, with the Senate to move the package either later in the day or over the President’s Day weekend. Following the vote, Congress will stand in recess until Feb. 23.

The final COBRA provisions, which were welcomed by the health insurance industry, are more generous than the 50% subsidy in the Senate version, but do not last as long as the 12-month subsidy included in both prior versions of the bill. Estimated to cost $24.7 billion, the provision would provide aid to an estimated 7 million involuntarily terminated between Sept. 1, 2008 and Dec. 31, 2009 to pay continue paying health insurance premiums through the 23-year-old Consolidated Omnibus Budget Reconciliation Act program.

COBRA allows employees who are terminated or leave their jobs voluntarily to remain in their former employer’s group health plan for up to 18 months, which can be extended to 36 months for those with extenuating life circumstances. Employers are permitted to charge COBRA enrollees up to 102% of the true cost of group health premiums, which average more than $1,000 per month.

According to the final report, the aid would be available for up to nine months, or until the terminated worker receives an offer of any new employer-sponsored health care coverage or becomes eligible for Medicare. Subsidies would not be available to those who earn more than $125,000 a year, or $250,000 per household.

The final version also strips out a provision opposed by the National Business Group on Health, which represents large employers, that would have allowed beneficiaries older than age 55 and those who have worked for the same employer for a decade to retain COBRA coverage until they become eligible for Medicare.

The measure also includes $17.2 billion in funding for health information technology infrastructure and an additional $2 billion in affiliated grants and loans. The bill sets a goal of seeing 90% of doctors and 70% of hospitals adopt electronic health records within the next decade, but it couples that with more stringent regulations on the transmission of identifiable health information. Insurers have protested that the bill’s notification requirements for security breaches were broadly worded, that it authorizing state attorneys general to enforce federal privacy standards and that new regulations could restrict health promotion, disease management and care coordination programs.

However, groups such as the Blue Cross Blue Shield Association and America’s Health Insurance Plans welcomed $1.1 billion in new funding for comparative effectiveness research. The BCBSA has proposed creation of an industry-funded institute to offer recommendations on the most effective and cost-efficient medical treatments.

“With comparative effectiveness, patients and providers will be able to assess drugs, technologies, and treatment options and make decisions that best reflect the patients’ needs and preferences,” AHIP President Karen Ignagni said in a statement. “We applaud efforts to address this important priority in the current economic recovery bills.”

The final package mostly eliminates a $54 billion provision, seen as potentially beneficial particularly to financial guaranty and mortgage guaranty insurers, that would have allowed corporations to carry back net operating losses for 2008 and 2009 against taxes paid in the prior five years. The final version offers a much more limited, $947 million carryback open only to businesses with gross receipts of less than $15 million, which could potentially be helpful to some agencies and small carriers.

Other small business tax provisions of potential benefit to agencies include $41 million to allow a one-time write-off of up to $125,000 in capital expenses; $829 million for raising the small business stock sale capital gains exclusion to 75% from 50%; and $415 million to temporarily reduce the built-in gains holding period for S corporations from 10 years to seven years.

Tags: COBRA, COBRA laws, COBRA legislation, COBRA stimulus package, COBRA subsidy

The federal government would pay 65% of COBRA health care continuation premium for one year for eligible beneficiaries who have lost their jobs since Sept. 1, 2008, as part of a massive economic stimulus bill unveiled Thursday by the House Democratic leadership.

The bill also would allow other beneficiaries to hold on to COBRA coverage, for decades in some cases.

The COBRA premium subsidy is certain to increase the number of laid-off employees opting for COBRA. The subsidy is the same provided under a 2002 trade law to employees who lose their jobs due to foreign competition and to pension plan participants 55 years and older in plans taken over by the Pension Benefit Guaranty Corp.

Currently, only about 20% of those eligible for COBRA enroll, a low acceptance due in part to the high cost of coverage. Under law, employers can charge beneficiaries a rate equal to 102% of the cost of coverage offered to employees.

With a higher takeup rate, employer costs would rise since beneficiaries opting for COBRA on average use more medical services than other health plan enrollees, surveys have found.

House Democrats estimate the subsidy would cost the government a total of $30.3 billion. In addition, the stimulus package, which legislators are expected to consider next week, would significantly stretch out the period of time some beneficiaries can retain COBRA coverage.

Under the measure, employees 55 and older and employees who have worked for the same company for at least 10 years could retain COBRA until they are eligible for Medicare at age 65 or obtain health care coverage from a new employer. In the case of younger employees, that could mean they could retain COBRA for decades.

Under current law, employees who lose their jobs can purchase COBRA for 18 months. In other situations, such as death, divorce or martial separation, beneficiaries have a right to keep COBRA coverage for 36 months.

Tags: COBRA, government insurance subsidies