Who Cares About Jobs: Let’s Fix Health Care Through COBRA
Yesterday, President Obama signed a massive economic stimulus bill called the American Recovery and Reinvestment Act of 2009. The legislative goal is to create 3.5 million jobs. One aspect of the law that ”flew under the radar,” however, is the COBRA subsidy provision which immediately affects employers.
U.S. employers who offer group health insurance plans to their employees must now advise any employee who is involuntarily terminated during the period of September 1, 2008, through December 31, 2009, that they are entitled to a 65% subsidy of that employee’s monthly COBRA premium. Employers have 60 days to notify those employees of these supplemental COBRA rights, and the Department of Labor is charged with producing a model notice letter for employers within the next 30 days.
The 65% premium subsidy is eliminated as an employee’s adjusted gross income increases. The phase out provision starts at $125,000 - $145,000 AGI for individual filers, and it is $250,000 to $290,000 for married couples filing jointly.
Although employers are expected to front the 65% subsidy immediately, they may recoup the expense through a reduction in their payroll withholding obligations.
At a political level, the new COBRA subsidy is clever. Under current law, neither pro-employer nor pro-employee advocates believe that COBRA works. Furthermore, the use of a health care apparatus that is already in place is a pragmatic, incrementalist solution of the kind that the Obama campaign promised before the President’s election.
Open questions remain, nevertheless, and the first is whether anyone actually believes that a COBRA subsidy will create jobs. One also wonders whether an incremental expansion of health care insurance through employers is the most cost effective way of delivering health care. Finally, the expansion of health care under the guise of a stimulus package is not healthy for future policy debates.
Regardless of where you fall on the stimulus plan, remember, you heard the following prediction here first: The 65% health care insurance COBRA subsidy for involuntarily terminated employees is not going away on December 2009. It will become a permanent entitlement like so many other temporary, federal stop-gap measures.
Last 5 posts by Ross Molho
- Employers Who Conciliate in Glass Houses Shouldn’t Throw Stones - December 29th, 2009
- COBRA Subsidy Extended - December 22nd, 2009
- Illinois Employers Face Greater Liability for Managers Who Engage in Sexual Harassment - June 16th, 2009
- The Arbitration Fairness Act of 2009: No Arbitration and No Fairness - May 29th, 2009
- Juries Decide Federal Employment Cases: Who Cares if Judges Don't Like Them? - March 27th, 2009
Tags: Employee Benefits, Employment Law