David Kirkpatrick

June 16, 2009

The stimulus plan, COBRA and business

I’ve done recent blogging on COBRA and the stimulus plan, but the topic is still fairly confusing in terms of how the unemployed obtain the subsidy and how this program ties into existing ex-employer based COBRA health insurance.

The link in this graf doesn’t make things perfectly clear, but it does offer some interesting ideas on the corporate side in maximizing benefits for both the company and the recently laid-off worker.

From the link:

However, to the extent that an employer subsidizes all or a portion of COBRA benefits following a set of employee layoffs, the employer subsidy period also reduces the length of the federal subsidy period.

For example, assume an employer subsidizes COBRA coverage for three months following a layoff.

Under this scenario, the employee would only be eligible for six months of the federal COBRA subsidy rather than the full time allotted.

For the above reasons, I recommend that employers provide employees with additional severance benefits and eliminate their corporate subsidy for COBRA coverage.

This saves corporate resources, and employees may take maximum advantage of the federal COBRA subsidy.

As an alternative to eliminating their corporate COBRA subsidy, employers may elect to measure COBRA from the “loss of coverage” rather than the actual qualifying event.