UBP blog

07/15/2009

The ARRA COBRA subsidy and the “marriage penalty”

Filed under: ARRA Act COBRA Subsidy,COBRA — ubpblogger @ 9:01 am
Tags: ,

Even before the ARRA Act went into effect this February and the federal COBRA subsidies began, it wasn’t always easy to follow what was, and was not, applicable to an individual and their family. To make matters more complicated, although COBRA is a federal law, some states, such as Massachusetts, have their own legislation that may or may not apply to a specific individual’s situation.

One example of an area that isn’t so easy to comprehend, but is vital to everyone, is the “Marriage Penalty.” Here’s the million-dollar question on this issue: If a married employee is laid off, and his or her spouse’s employer offers health insurance, is he or she still eligible for subsidized COBRA coverage with a former employer?

Under the ARRA Act, the answer to this question is NO. The ARRA COBRA subsidy is NOT extended to otherwise assistance eligible individuals (AEIs) whose spouses are currently employed and are currently enrolled in their employer’s health insurance plan.

In Massachusetts, where individual health insurance coverage is required, the state legislation would then kick in, and these otherwise AEIs would have two options:

1. Take unsubsidized family coverage on their spouse’s plan, or

2. Go to the Commonwealth for coverage.

In most other states, their options would be to either take unsubsidized family insurance on their spouse’s plan or remain uninsured.

The goal of the ARRA COBRA subsidy was to help make sure that newly unemployed Americans could afford to have health insurance coverage– thus, avoiding financial devastation due to unforeseen medical costs or illness. Our legislators have clearly dropped the ball here. Monthly premium costs for most family plans come in around $1,200+ per month, and employer contribution percentages for these plans generally remain low.

So an estimate for the average additional cost that a married couple would incur, if they needed to switch from both spouses having individual insurance through their respective employers, to one spouse getting laid off (and both spouses now having to take the family plan through the employed spouse’s employer), would be $400 dollars.

A married couple with only one income would be saddled with $400 extra dollars per month, right at the time that one of them has lost their job. This is supposed to be a stimulus?

Fortunately, new answers to affordable health coverage are starting to pop up, and although these are far from perfect, we can (sadly) count on the ever-growing number of uninsured American families to inspire more and more alternatives in this area.

If you or your spouse has recently terminated employment and lost health coverage, make sure to check the various subsidies or health insurance options that your own state may offer. A simple Google search should get you started. Remember that even choosing a high-deductible medical insurance that covers only “major medical” illnesses and injuries could be a financial life saver down the road.

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