Unemployment, COBRA coverage questions

by Lesley Politi on March 25, 2009

Unemployment, COBRA coverage questions

Sunday, March 8, 2009

Recent columns on unemployment and the federal subsidy for COBRA health coverage have generated a lot of questions from readers. Here are some answers.

Q: I worked for a company as an independent contractor. Am I eligible for unemployment benefits?

A: Generally, independent contractors and self-employed people are not eligible for unemployment benefits. However, you might be if you had enough wages from a job you held as an employee during your base period, which is the 12-month period three to six months before you lost your job. It won’t hurt to apply.

Q: I lost my job at the end of last year and tried to find a new one but couldn’t. Now I decided to open a small business. Will that affect my unemployment benefits?

A: It could. It depends in part on whether you continue to seek full-time work while working on your small business and whether you would abandon your business if work was offered and you couldn’t do both.

If you earn money from your small business, those earnings would be deducted from your unemployment benefits, says Loree Levy, a spokeswoman for the California Employment Development Department.

Q: At what point does one become eligible for unemployment benefits after your workweek is reduced?

A: In California, it’s sometimes possible to receive partial unemployment benefits while still working if your hours have been reduced.

If an employer sets up a Work Sharing Unemployment Insurance Program with EDD, employees whose hours and wages are cut back at least 10 percent will get some benefits.

Even if your employer has not set up a formal program, you may qualify if your weekly earnings, after the cutback, are less than $600.

For more information, go to www.edd.ca.gov and search “work sharing” and “partial claims.”

COBRA subsidy: A law known as COBRA lets many workers who lose their jobs continue their group health coverage for up to 18 months, but employers can require them to pay the entire cost. In California, some employer plans must offer COBRA coverage for 36 months.

My Feb. 26 column said that, thanks to the stimulus act, if you are involuntarily terminated between Sept. 1, 2008 and Dec. 31, 2009, and are eligible for COBRA, the federal government will pay 65 percent of your premium, through your employer, for up to nine months. You pay the other 35 percent.

The subsidy can also cover your spouse or dependents who are eligible for COBRA, but you cannot get the subsidy if you are eligible for Medicare or another group health plan, such as your spouse’s.

If you were laid off since Sept. 1, and qualified for COBRA but declined coverage, you will get another chance to sign up for COBRA and receive the subsidy for up to nine months.

Q: How do I apply for the subsidy?

A: If you were terminated since Sept. 1, you should receive a notice from your former employer or health insurance company no later than April 18, says Mark Boxer, an employee benefits lawyer with DLA Piper in San Francisco. The notice will explain how to apply. Once you receive your notice, you will have 60 days to apply.

Q: When does the subsidy begin?

A: If you were laid off after Aug. 31 and have been paying your own COBRA premiums, the subsidy will be retroactive to March 1.

If you were laid off after Aug. 31 but declined coverage, you can now apply to have COBRA coverage retroactive to Feb. 17.

The subsidy will begin when COBRA coverage begins.

Q: Is this subsidy taxable?

A: No. However, if your adjusted gross income for the year in which you receive the subsidy is higher than $125,000 (single) or $250,000 (married filing jointly), you will have to pay back all or some of the subsidy when you file your tax return.

You could waive the subsidy, but Boxer says it would be better to take it because the waiver is irrevocable.

Q: I might lose my health insurance in August. My domestic partner has coverage at her company, which technically I could go on, but my insurance coverage with my current provider is better, even if I had to pay 35 percent.

Here’s the dilemma. You can’t get the new COBRA subsidy if you could be covered under someone else’s health plan. But since the federal government doesn’t recognize my partnership, would I be eligible for the subsidy if I continued COBRA on my own?

A: Yes, because the federal government does not recognize domestic partners.

Q: My husband will be terminated later this year. I plan to continue in his health plan through COBRA even though he has obtained coverage for himself on his own. Will the subsidy be available to me even if my husband, the actual laid-off employee, does not utilize COBRA?

A: Yes, as long as you are not eligible for Medicare or another group plan.

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