Monday, January 4, 2010

COBRA extension: news and predictions

Happy New Year!

As we wait for House-Senate negotiations on health reform to progress, we have news to report and predictions to offer on the COBRA continuing health coverage front.

First, the news. In late December President Obama signed legislation that extends both the duration of the COBRA premium subsidy for unemployed workers already receiving the benefit, and the period of eligibility for newly unemployed workers to receive subsidized coverage. The extension, tucked inside the Defense Appropriations Act (P.L. 111-118) became law on December 19 (scroll down to page 65 for Sec. 1010).

Under the new law, assistance eligible individuals may now receive up to 15 months of subsidized coverage, rather than the nine months of coverage provided under the American Recovery and Reinvestment Act (P.L. 111-5) enacted in February 2009. The change applies retroactively, which means that those whose benefits began to expire at the end of November 2009 may maintain uninterrupted coverage, so long as they pay the reduced premium in a timely manner.

The Act also expands the definition of "assistance eligible individual" to include those terminated involuntarily during the period that begins September 1, 2008 and ends with February 28, 2010. Under the original law, the period of eligibility ended on December 31, 2009.

And now for the prediction.

As you may recall, the House bill (H.R. 3962) touts as an "immediate" reform an expansion of COBRA benefits to help bridge the transition to near-universal coverage. Under the proposal, former employees could continue coverage under their former employer's plan until the Health Insurance Exchange is up and running (either in 2013 or 2014). Note that there's no subsidy provided for these extended benefits--employees could still have to pay up to 102% of the premium.

Back in November, we were skeptical that this provision would make it into final legislation. No comparable Senate provision exists, and employers won't relish the expanded administrative duties the provision would bring.

Now, some are suggesting it's to the Democrat's advantage to load the final package with as many "immediate" reforms as possible. Why? New taxes to help defray the cost of the reforms kick in earlier than do the market reforms and subsidized coverage. Thus, as David Herszenhorn of the New York Times reports, "some Republicans have criticized the bill as akin to legislation on a layaway plan: pay now for benefits later."

So, will this political pressure help to push the COBRA expansion into the final package? We continue to predict that it won't. If it had a chance to get 60 votes in the Senate, presumably the provision would already be in the bill.


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