Governement bill would offer COBRA subsidies, extend eligibility

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.