COBRA Subsidy Extended for One Month

cobra The Great Recession has hit Americans long and hard. While the loss of income that comes with a layoff is always a major blow, loss of health benefits can be cataclysmic, and that's where COBRA can be a real lifesaver.

President Obama signed a COBRA subsidy extension into law on March 2, which is good news for a lot of people still on the job hunt.

Congress had previously passed legislation that extended COBRA for people who lost their jobs through February 28. However, with unemployment rates still at nearly 10 percent, The American Recovery and Reinvestment Act that the president signed, temporarily extends COBRA benefits for workers who've been laid off through March 31. The bill also allows laid off workers whose unemployment benefits were set to run out at the end of February to collect for another month.

With the recovery so far taking off slowly, Congress is considering an additional bill that would extend unemployment benefits and the COBRA subsidy for the remainder of the year.

The point of COBRA is to allow laid off workers to benefit from their former employer's group insurance rates for a period of time. It's meant to fill the health insurance gap while the worker looks for a new job (that ideally comes with new insurance benefits). Here's how it works:

  • Laid off workers pay 35 percent of their COBRA health care premium.
  • Employers are reimbursed for the remaining 65 percent of the premium through a tax credit.
  • The reduction in benefits, meaning paying only 35% instead of the full 100%, applies only to coverage that began on or after February 17, 2009 and cuts off on March 31, 2010.
  • Unemployed workers who are paying for COBRA benefits as of March 31, 2010 can extend their benefits for an additional month.

To qualify for an extension, you have to have either been laid off or lost your insurance coverage because of a reduction in hours between September 1, 2008 and March 31, 2010.

While many people feel that COBRA benefits are helpful, I've never been a huge proponent of them since the premium most people wind up paying is akin to putting out an additional rent each month. That's tough to pull off on unemployment. But this COBRA subsidy that asks unemployed workers to cover only 35% of their monthly premium could be a huge boon and financial relief to thousands of unemployed Americans.

Next:The Unemployment Rate Explained >>

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