Just the holiday gift many wanted: A COBRA subsidy extension

Santa couldn't have done better.

Millions of Americans got a great gift when Congress passed and President Obama signed a defense spending bill that includes a provision to extend a subsidy helping those out of work continue their health insurance coverage.

In February, Congress established the subsidy under the Consolidated Omnibus Budget Reconciliation Act, commonly referred to as COBRA.

Under COBRA, former employees can continue to get health coverage at their former employer's group rates. But they have to pay the full premium -- including the share that the employer used to pay -- plus a 2 percent administrative fee.

Understandably, many who become unemployed cannot afford the premium, which on average can consume 83 percent of their unemployment income, according to a report by FamiliesUSA.

Laid-off workers first became eligible for the subsidy in March. Those who take advantage of the program pay 35 percent of the COBRA premium, and employers pick up the remaining 65 percent, which is then reimbursed by the government through a payroll tax credit.

Because the subsidy was to last only nine months, the first eligible group was cut off at the end of November. Others who were facing losing the subsidy at the end of the year became stressed at the prospect of unaffordable monthly payments.

"How can we, as unemployed American citizens, pay those ridiculous premiums?" asked Jeff Krebs of Reynoldsburg, Ohio, in an e-mail to me.

Krebs and his wife, Marianne, are both unemployed. Jeff lost his job 16 months ago and his wife lost hers in April after 25 years with the same company. Thanks to the COBRA subsidy, their health insurance premium was $450 a month.

But without an extension, the Krebs were facing a jump in their premium to $1,550 by the new year.

"This is like winning the lottery for us, especially right before Christmas," Krebs said. "You do not understand what a relief that has just been lifted off our shoulders."

I do understand. I hear often from so many laid-off workers struggling financially to keep health coverage.

The COBRA subsidy program extension included in the 2010 Department of Defense Appropriations Act will do the following:

-- Expand the amount of time people can get the subsidy from nine months to 15 months.

-- Extend the eligibility period for the COBRA premium reduction an additional two months. Before the extension, you had to have been involuntarily separated from your job between Sept. 1, 2008, and Dec. 31, 2009, to qualify for the reduced COBRA payment. That period of eligibility has now been stretched out to Feb. 28, 2010.

-- Give credit against future payments to people who paid the full premium in December. Individuals should contact their plan administrator or employer sponsoring the plan to discuss getting a credit, said Phyllis C. Borzi, assistant secretary of labor. The legislation assures that people who were receiving assistance but whose eligibility has expired will be reimbursed, and they will have the option for re-enrollment, said Sen. Sherrod Brown (D-Ohio), one of the legislators who pushed for the subsidy extension. This particular provision is a welcome relief for Ricky Crawford of Huntsville, Ala. He and his wife had to make a full premium payment of $1,013 in December. With the subsidy they were paying $350. "My wife has some health issues, which, without insurance, we would certainly struggle financially," Crawford told me.

-- Require employers to send out notices to laid-off workers outlining the most recent changes in the COBRA subsidy. For example, individuals who had lost the subsidy will now have additional time to pay the reduced premium to keep their coverage.

After the subsidy was first passed, COBRA enrollment doubled, according to an analysis by Hewitt Associates. With the subsidy, the cost of maintaining the average policy is $398 per month for a family and $144 for an individual, according to the Kaiser Family Foundation. Without the subsidy, that cost jumps to $1,137 per month for family coverage and $410 per month for individual coverage. Unfortunately, if your company closed or went bankrupt and there no longer is a group health plan, the COBRA subsidy is not available.

For more details on the COBRA subsidy, contact your plan or go to the Department of Labor's Web site at www.dol.gov/COBRA. You can also call the Employee Benefits Security Administration toll-free at 866-444-3272.

Thanks to the COBRA subsidy, this Christmas will be, as Donny Hathaway soulfully sang, a very special Christmas.

Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.