What is in the New ARRA Law that Obama signed? Some details on COBRA changes, while we wait for details on implementation.

by L.A.S. --

While the thousand-page ARRA law (American Recovery and Reinvestment Act) became law on March 1, 2009 when President Barack Obama signed it on Feb. 17, your employer was awaiting the details on the law in order to be in compliance with it. This means as a practical matter that thousands desperately waiting for help in keeping up their former employer's insurance under COBRA provisions could not be assured of a smooth transition to the emergency provisions of the law.

The law itself is written rather vaguely and so employers are scrambling for guidelines on implementation of the new rules. Granted, the ARRA law was written under pressure and so some parts are less defined than others.

THE OLD COBRA LAW: a qualified beneficiary who elected to continue health insurance coverage under his former employer's group plan had to pay the full premium, plus a small percentage (two percent) toward handling fees.

THE NEW COBRA LAW: Employees who were terminated between Sept. 1, 2008 and Dec. 31, 2009 “due to an involuntary loss of employment” will have 65 percent of the premium subsidized by the federal government for a period of UP TO nine months. Included in the group of employees covered by this new provision are those former employees who already declined COBRA coverage. Former employees will be covered for a total of 18 months: nine months of subsidized coverage and nine months of unsubsidized coverage.

The subsidy is NOT available to employees whose modified adjusted gross income exceeds $145,00 (or $290,000 for joint filers). Those with incomes between $125,000 and $145,000 will see a proportional decrease in their subsidy.

The subsidy is supposed to paid out of credits against the employer's payroll tax liability. In other words this is an immediate tax exemption for the employer and should not be a crushing burden to them financially. Anyone who claims otherwise is not understanding the ARRA provisions.

To restate it more simply: eligible individuals pay 35 percent of the total premium while the employer pays the other 65 percent, which is then reimbursed to the employer as a tax credit.
Some confusion may exist over some proposals that did not become part of the final bill. One major item that was changed was the proposal to allow those former employees over age 55 to re-enter the COBRA umbrella of coverage, at least until they became Medicare eligible or obtained coverage through another employer. Again, that proposal failed to become part of the final bill.

Other proposals that died in the talking phase includes one that would have extended coverage under COBRA ; it would have been far too costly and would have essentially rewritten the whole COBRA program. While we might discuss such issues again one day, it was deemed entirely inappropriate for emergency or stimulus legislation.

Will the sickest former employees likely rush to get covered under this new COBRA provision? It is likely that the answer will be yes, just because of the fact that people with ongoing health issues need uninterrupted checkups and medications. People do not elect COBRA unless they already have health issues that make it difficult to be accepted for other health insurance policies.

Nevertheless, one must bear in mind that for most people, even those with serious health challenges, do recover and return to the realm of the healthy.

The other significant part of the ARRA bill which impacts health care costs is the provision to speed up conversion of medical records to an electronic, computerized form. Nineteen billion dollars was earmarked for this huge effort. We already have the proven example of the VA which has converted its medical records to an electronic format, and has seen it raise levels of accuracy and speed of transmission to other providers.

A major barrier to this conversion is agreeing on a format that is compatible with the majority of providers, and observing the laws regarding privacy and security of medical records as per HIPAA requirements. While the impetus for writing the HIPAA law was to maintain security of medical records when electronically submitted to insurers, it is at times used to block or deny proper access to those medical records.

Michelle’s Law Languishes in Congress; Would Allow Medical Leave

Those of us who live outside New Hampshire probably never heard of Michelle’s Law. But it is a provision for college students to continue their student health insurance coverage even if they have to take a medical leave from school for a year. That way, they do not have to exercise the COBRA provision of the student health coverage, under which policyholders pay 102% of the full premium cost.

HB 2851 was the United States House of Representatives’ version of the bill; this bill passed unanimously on July 30, 2008. The sister bill SB 400 is languishing, however, in the Senate. The bill is endorsed by the American Hospital Assn., the National Patient Advocate Foundation, the American Heart Assn., and America’s Health Insurance Plans.

The bill is named for Michelle Morse, a student at Plymouth State University who took chemotherapy treatment for colon cancer. To avoid losing her student insurance, she enrolled in a full course load. The premium to continue her coverage under the COBRA law would have cost over $500 a month, a charge her family could not afford.
What follows is excerpt from MichellesLaw.com about the bill when it was signed into law by Gov. Lynch of New Hampshire.

Joined by the family of Michelle Morse and legislators, Gov. John Lynch today signed "Michelle's Law," helping ensure that college students do not lose their health insurance when they need it most.
The legislation, HB 37, ensures that seriously ill college students can continue to receive health care insurance through their family's health insurance policy even if they are unable to maintain their full-time student status.
"College students should not lose their health insurance just when they need it the most. Now, in New Hampshire, they won't. Michelle's Law will provide an important protection for New Hampshire families," Gov. Lynch said.
Michelle Morse was a student at a Plymouth State University when she was diagnosed with colon cancer. Although her doctor suggested she take a leave of absence from school, Michelle Morse maintained a full course schedule in order to keep her health insurance coverage. Michelle Morse died in November [2005].

Read the background behind this bill at http://www.michelleslaw.com/index.php.

The COBRA Law: Portability of Group Health Insurance

The COBRA Law: Portability of Group Health Insurance

Most people have by now heard of the Cobra law and think they know what it says. However, there are several sections of the law, and each one covers a different class of persons. (For the entire COBRA law, please contact your senator or representative’s office, as they can usually send you a copy in the mail.

Participants in group medical plans are protected by this federal law (passed in 1985) that guarantees their right to opt to continue coverage under the same group plan. To be explicit, the terminated employee is not converting his group coverage to an individual certificate; he is continuing the group coverage. However, if the employee is terminated for reasons of gross misconduct, then he is not covered by COBRA. In other words, COBRA protects employees who are laid off but not those who are let go for cause, IF your employer has 20 or more employees.

*For the terminated employee, coverage is extended for 18 months, at a premium of 102% of the group premium to cover the extra handling.

*For the terminated disabled employee, coverage is extended for up to 29 months. For the first 18 months his premium will be 102% of the group premium; for months 19-29 his premium is 150% of the group rate. This group must meet the Social Security definition of total disability, which is very narrow.

*The dependents of the terminated employee may extend their coverage for 36 months, and their premium is 102% of the group rate for all 36 months. These dependents are those who lose coverage due to death, divorce, or in the case of a minor child, aging past the definition of a dependent.

*There are also provisions for a terminated or retired employee who becomes eligible for Medicare to continue the group insurance for three years.

*The employee’s hours are reduced so that he no longer qualifies: 18 months of continued coverage under the group plan (or 29 months if disabled).

*The employee dies: -- his dependents are covered for 36 months.

While this law was a landmark in giving employees some coverage in the event of job loss, it often gives employees a case of sticker shock when they are quoted the full cost of their premium. My advice is to take the COBRA plan right away, and take advantage of the time to shop around for a lower cost plan that will cover your priorities for you and your family.

Try to avoid a break in coverage at all costs because it will cost you dearly later on. If your break in coverage exceeds 63 days, the next insurer can deny expenses related to any pre-existing condition.