Stimulus Package Includes COBRA Health Insurance Subsidies
.jpg)
Before getting to today’s topic, I’m going to once again shout into the wind as I have for years that employers providing health insurance for employees was never a good idea. The conceptual flaw is apparent. Providing health insurance as a benefit puts a third party between the two real parties to the contract. The doctor is no longer in contract privity with his or her patient. When a patient is spending real dollars for health care, they have an incentive to bargain down the price. When uncle employer is paying, the sky’s the limit, and health care prices soar. The result is what we see today. Strikes are more often over health insurance than worker safety or pay, and when an employee is fired, the cost of maintaining the insurance under COBRA has grown too high. Employers can still offer health benefits, but it should be in the form of a monthly payment. “Here’s $500 a month for health insurance. Whatever you don’t spend, you can keep.” If that approach had been used, the push to offer health care at lower prices would have been far more intense than HMOs negotiating fees.
Which leads me to the issue at hand. The latest stimulus plan includes a COBRA subsidy for employees laid off between September 1, 2008 and December 31, 2009. If you have an employee that declined COBRA coverage after September 1, 2008, you must notify the employee of this subsidy. There is a needs test, but it’s pretty high – a maximum of $125,000 annual income for singles, $250,000 for couples. The employee can draw the subsidy for no more than nine months.
Incidentally, in line with what I said in my opening rant, many terminated employees call my office wanting to pursue wrongful termination actions, motivated most by the fear of losing their health insurance. They rail against the ridiculous cost of the COBRA plan, unaware that was the price their employer was paying. Often as not, they are unaware that they don’t need that COBRA coverage. COBRA only makes sense if the terminated employee is going to be uninsurable due to a pre-existing condition. Admittedly, something as simple as taking heartburn medication will constitute a pre-existing condition, but make certain your former employee knows that if they do not have such a condition, it will be far cheaper to get a bare bones bridge policy until they find another employer that is making the mistake of providing health insurance.
http://www.businesslawalert.com/admin/trackback/114465
