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Qualifying for a reduction in your COBRA premiums

Posted by Andrew Chan  September 23, 2009 03:00 PM

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During the past week, we’ve received a couple of questions about qualifying for the COBRA subsidy that was enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA). Before I answer those questions, here’s an overview of the subsidy and how it works.

Under the ARRA, individuals who are eligible for COBRA coverage because of involuntarily termination from their job may be eligible for a reduction in their COBRA premiums. The reduction would allow the individual to reduce their COBRA premiums by 65% for up to 9 months.

To be eligible for the reduced premiums you must satisfy the following:

* You must be eligible for COBRA coverage between September 1, 2008 and December 31, 2009;

* Your eligibility for COBRA coverage must be because you were involuntary termination from your job at sometime between September 1, 2008 and December 31, 2009. Keep in mind that you would not generally be eligible for COBRA coverage or the reduction in COBRA premiums if you were terminated because of gross misconduct;

* You must elect COBRA coverage when first offered or during the additional election period provided under the ARRA. The additional election period applies to those who were involuntarily terminated from their job between September 1, 2008 and February 17, 2009 and failed to initially elect COBRA coverage. Those individuals will have an additional 60 days to elect COBRA coverage and receive the subsidy.

The subsidy does have a phase-out. In The subsidy is reduced for those individuals whose modified adjusted gross income (MAGI) exceeds $125,000 dollars ($250,000 dollars for those filing joint returns) and is completely phased-out for those individuals whose MAGI exceeds $145,000 dollars ($290,000 dollars for those filing joint returns).

Here are your questions:

Q1. I was laid off my job in May 2008. I do some independent consulting now but do not make as much I did with my previous employer. Am I eligible for the COBRA subsidy?

Unfortunately, I do not think you will qualify for the subsidy. The subsidy applies to those who were involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidy is not retroactive before September 1, 2008 and your termination date occurred before then.

Q2. I used to have health care coverage with my employer's plan but was let go on 8/31/09. They offered me insurance under COBRA. Am I eligible for COBRA coverage with a reduced premium?

Yes, you should qualify as long as you do not exceed the modified adjusted gross income limits and you are not eligible for other group health insurance coverage (e.g., a new employer’s plan, a spouses plan, Medicare).

For more information about the subsidy visit the following web site:

IRS COBRA Health Insurance Continuation Premium Subsidy,,id=204505,00.html

Department of Labor: COBRA Continuation Coverage Assistance Under ARRA

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