COBRA has been around since 1986, providing employees with a limited time option to continue with the health insurance coverage that they had while employed. Unless the employee is disabled, the coverage lasts for a maximum of 18 months; for a disabled employee, the coverage extends for 24 months. The coverage ends when the employee obtains alternate coverage or stops paying the entire premium. COBRA also provides an avenue for a newly unemployed person to join a spouse’s or, in limited cases, a parent’s coverage through another employer, without waiting for an open enrollment period. Many newly unemployed people find the premium payment onerous, however, especially if they enjoyed a family coverage policy.
Trying to deal with the state of the economy, Congress gave some premium relief to laid off employees. Under the American Recovery and Reinvestment Act of 2009, employers must pay 65% of an employee’s COBRA payment for employees laid off between and December 31, 2009. While employers will front the cost of the insurance premiums for COBRA-eligible individuals, the federal government will issue a payroll tax credit to the employer to compensate for the portion underwritten by the employer. You can read the law here.
COBRA is available to employees who quit or were terminated for reasons other than gross misconduct. COBRA applies only to employers with at least 20 full-time employees. The subsidy under the With the American Recovery and Reinvestment Act of 2009 phases out as the gross income of the employee rises.
For smaller employees in Maryland, the state mini-COBRA law kicks in. Employees are entitled to continue on health insurance coverage, provided they pay the premium plus, at most, a 2% administrative charge. Smaller employers are also subject to the premium relief system, but do not have to advance the 65% of the premium that larger employers do. Under theMaryland health insurance continuation plan, the health insurance carrier provides the appropriate forms to the laid off employee, and it will accept the 35% premium sent by the former employer. Then the insurance company will then get the tax credit provided by the federal government to cover the 65% premium payment not paid by the unemployed person.