Californians may get federal COBRA insurance subsidies

by Lesley Politi on April 9, 2009

Bipartisan legislation that would let laid off employees of small California businesses apply for federal dollars that will help them continue their health insurance is now moving through the state Legislature.


The legislation is co-authored by Assemblymen Dave Jones, D-Sacramento, and Nathan Fletcher, R-San Diego, respectively the chairman and vice-chairman of the Assembly Health Committee. It is sponsored by the state Department of Insurance.


So-called “COBRA” health insurance, the name coming from the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, lets those covered by a group health plan at work continue the same plan after they leave a job – if they pay the full premium, not just their former employee share.


And that’s usually a whopper, especially to those suddenly without a job.


“Thousands of laid off Californians are without health insurance because they can’t afford their Cal-COBRA payments,” says state Insurance Commissioner Steve Poizner. “I’m proud to see all parties come together to allow so many unemployed Californians to keep their health care coverage despite the nation’s recession.”


The Department of Insurance recently determined that a change in state law was needed to allow laid off employees of small businesses to apply for the federal subsidy. Since then, CDI has drafted bill language along with legislative staff, small businesses and insurers to allow access to the federal money.


The federal stimulus package signed on Feb. 17 includes a 65 percent COBRA subsidy to continue the health coverage for employees who had been laid off between Sept. 1, 2008, and Dec. 31, 2009. The subsidy lasts up to nine months and is subject to some qualifications. Those who had previously declined to enroll in the COBRA program or discontinued coverage due to cost or other factors will be notified of the subsidy and be allowed to enroll in the program.


Federal COBRA covers employees of firms that employ 20 or more employees. California has a separate program, known as Cal-COBRA, which extends the same benefits to employees of small businesses that employ between 2 and 19 people. The federal legislation permits states to allow these employees to qualify for the 65 percent subsidy, but only if the state passes specific legislation.


AB 23 would explicitly allow those who worked for California small employers to enroll in Cal-COBRA. It will include those who lost their jobs dating back to Sept. 1, 2008, and allow them to withdraw a previous rejection of Cal-COBRA coverage.


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