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The Law of Unintended Consequences for Job Seekers: Healthcare Reform and Pre-Existing Conditions

cb — Sat, 05 Feb 2011 22:17:54 +0000

The PPACA Healthcare Reform Act abolished denial of coverage or exclusion of pre-existing conditions for medical coverage of children age 18 or under. As a result, insurance companies in Texas stopped issuing policies for children 18 or under unless there is at least one adult on the policy as well.

Up until the Healthcare Reform Act became law, a parent could purchase an individual policy for a healthy child for a much lower premium than if the child were covered by the parent’s group health plan. Since most employers cover the medical insurance premium for employees and not employees dependents, this was a lower cost way for parents to insure their children, and was especially important for lower wage parents.

For job seekers, there is an unintended consequence of Healthcare Reform. If both adult parents have pre-existing conditions that would require them to elect COBRA (since they would be denied individual coverage), they can no longer purchase a lower cost individual plan for their minor children.

If unemployed adult parents have too much income to qualify for Texas CHIP or medicaid, then the only other major medical insurance option for covering their minor children is to cover them through COBRA.

The cost of COBRA for a dependent currently ranges between $250 to $500. The cost of covering a child in Texas , age 2-18, was less than $100.

The Healthcare Reform Act’s mandates, hidden taxes, and regulations raise the cost of healthcare, and health insurance, and COBRA. For unemployed parents with kids, it has also reduced access to lower cost health insurance options.

FAQ: When Should I Sign Up For COBRA, Part 3

cb — Sat, 05 Feb 2011 21:41:47 +0000

One of the most often asked I get during COBRABusters workshops is if someone should wait until close to the 60 day deadline to make a decistion about COBRA coverage.

There are three important reasons why you shouldn’t delay. Each reason is an opportunity cost. This post deals with the third and most costly reason and opportunity cost. If you have not already done so, you can read here the posts about the first reason here and the second reason here why you shouldn’t delay your COBRA decision.

The third reasonwhy you shouldn’t delay is something I see over and over again with jobseekers. About 55 days after termination is usually when when many people worry about COBRA.

But 55 days into a job search (with no or little income coming in) is exactly when a job searcher should really have their job search ramped up, with a fine-tuned resume or resumes and cover letters, business cards, their target companies and positions identified, they should have developed and mastered their thirty second commercial, answers to interview questions, etc.

The first one or two weeks into a job search is exactly when you should develop a new personal budget, determine what they can do to reduce their cash outflow, and make their decision about your medical insurance.

Even if you don’t have to implement the decision until later, at least you have resolved the issue in your mind (and your spouse’s mind). Making a healthcare decision right away eliminates stress and lets you focus 100% on your job search/marketing campaign starting in the second month.

If you wait until close to your 60 day COBRA deadline to explore options and make a decision, you’ll lose focus and expend energy that should go into your job search campaign.

Every month you’re unemployed is another month in which you have to pay their own health insurance premiums, vs. landing a job with an employer that will pay your health insurance premium for you. This represents a huge opportunity cost.

As a job seeker, you are conducting a vital marketing campaign to help win not just any old job, but “the job” that you really want and are passionate about, and not the job that you have to accept to pay the bills.

Every day in job search mode is a day with big opportunity costs. Not only are you not earning an income and paying for your own insurance, but you are expending a tremendous amount of mental and emotional energy. There are few things more stressful and exhausting in life than being out of work and searching for a new job. And for every day someone you are out of work, your job search is a day longer, and the days quickly stretch into weeks/months/and even years.

I know first hand and from the folks that I talk to that the emotional and mental toll of a job search on families and marriages is tremendous. The longer you’re unemployed, the harder it is to explain your employment gap to a potential hiring authority, recruiter or referral source. And regardless of your past career successes and qualifications, the longer you are in the job market, the less desirable you are perceived vs. other people in job search mode that are competing for the same job.

In today’s lousy job market, there are hundreds if not thousands of qualified candidates for every job opportunity that is posted. And the same goes for the “hidden job market” of jobs that are only accessed through referrals and networking. The longer you are out of work, the less likely you are of even being referred for these hidden jobs.

Worse yet, the longer you are out of work, the more likely you are to take any old job, not the job yo really want. Unfortunately, this often leads to a second, more costly, and more difficult to explain job search, within a year or less of accepting that “any old position.”

In summary, the third reason to make a decision about COBRA as soon as possible is that as a job seeker, you are in competition for the same coveted few positions as perhaps hundreds or thousands of other job searchers. If, at 55 days into a job search, you are wastin your valuable time exploring options and applying for coverage or filling out and overnighting your COBRA election forms, while your competition is working hard to build their networks, meeting with potential referral sources, and interviewing, who is likely to get hired first? And who is likely to earn income first and have their insurance premiums paid by their new employer?

Just like the fighter that lets down his right guard for a split second in the tenth round and gets TKO’d by their opponent, or the golfer that took his eye off the ball before making contact, the job searcher that delays a COBRA decision until right before a deadline gives their job competition a huge advantage over finding a job and getting hired.

The mental and emotional toll from even a short job search on an individual and their family is huge, and missed opportunities in a job search can often be traced back to lack of focus and not taking action. And with a little soul-searching, perhaps being reluctant to make decisions about COBRA is an indicator of a tendency to avoid making other decisions and taking action.

If this sounds like someone you know, please forward this post to them. Make decisions quickly, implement your decisions when it benefits you most. Stay focused on your goal and devote your talents and all your energy towards reaching your goal. Avoid procrastination and anything or anyone that diverts your attention on reaching your goal.

FAQ: When Should I Sign Up For COBRA, Part 2

cb — Sat, 05 Feb 2011 21:37:33 +0000

One of the most often asked I get during COBRABusters workshops is if someone should wait until close to the 60 day deadline to make a decistion about COBRA coverage.

There are three important reasons why you shouldn’t delay. Each reason is an opportunity cost. This post deals with the second costly reason and opportunity cost. If you did not read the post about the first reason, you can find it here.

The second reason is this: Chances are good, it won’t get there in time. It is highly risky to wait close to 60 days to elect COBRA as your COBRA election must be received by the 60th day.

If you wait until the 58th or 59th day, then you better overnight the form at your own expense because if you don’t have a delivery/receipt confirmation by overnight delivery or certified mail then it is your word vs. your COBRA administrator’s word whether they received it within 60 days.

So you’ve blown some extra cash in overnight mail and delivery/receipt confirmation, just to prove somebody received it.

In the years I’ve been advising people through the COBRABusters workshops, I can recall several instances where someone was denied COBRA because their COBRA administrator claimed they did not receive the check and the ex-employee had no documented proof otherwise. If your COBRA administrator takes a hard line on this, you could be denied COBRA, which for adults with pre-existing conditions is the only coverage option.

Risking insurability is the second reason why you should not delay your COBRA decision, but the third reason is potentially more expensive than reason one or two.

FAQ: When Should I Sign Up For COBRA, Part 1

cb — Sat, 05 Feb 2011 21:35:48 +0000

One of the most often asked I get during COBRABusters workshops is if someone should wait until close to the 60 day deadline to make a decistion about COBRA coverage.

There are three important reasons why you shouldn’t delay. Each reason is an opportunity cost. This post deals with the first and least costly reason and opportunity cost.

Technically, if your coverage expires on your termination date, you already have a gap in coverage from the next date forward, so you willat least have to fill this coverage gap by paying for COBRA retroactive to when your coverage ended, so that whenever you get new coverage in place you won’t have a gap in coverage, whether or not you decide upon COBRA or other coverage.

So even if there is health insurance that is less expensive than COBRA, the longer you wait to to explore your options and complete an application, the longer you will have to purchase more expensive COBRA for that period, plus you should figure on about two to four weeks for your application to be approved.

Alternate coverage, if eligible, is usally about a third less expensive than COBRA. Waiting until close to sixty days to explore alternatives and decide whether to elect COBRA means you’ve perhaps spent a third more for the sixty days since your termination, plus another thirty days while an application for alternate coverate is completed and approved.

As an example, if your family’s COBRA premium is $1,500 per month, your opportunity cost is extra $500 vs. what you might be paying for alternate coverage.

Believe it or not, this represents the smallest opportunity cost and least important reason not to wait until close to 60 days to elect COBRA. To learn about the other reasons why you shouldn’t delay, follow this link to the next post.

The End of COBRA Premium Subsidy Extension and Lessons Learned

cb — Wed, 02 Jun 2010 15:14:06 +0000

On Friday, June 28th, the House of Representatives approved American Jobs and Closing Tax Loopholes Act (H.R. 4213). This legislation requires 401(k) fee disclosures, provide relief for pension funds and extend unemployment benefits.

However, noticeably absent from the was a planned extension of the COBRA premium subsidy, which was omitted in order to gain enough votes for passage. The Bill passed, 215-204, before the House recessed for a one week Memorial Day Holiday.

Please note, this does not impact the COBRA Premium subsidy for individuals already receiving it who were involuntarily terminated prior to the end of May. And this does not mean that individuals who are involuntarily terminated beginning June 1 will not be eligible for a subsidy if a Senate and House Reconciliation subcomittee decide to reinsert the COBRA premium subsidy extension into the finalversion of the bill that both the Senate and House then approve.

There will likely be a Reconciliation rather than passage in the Senate of the House Bill because of the complexity and the political sensitivity of the Bill’s other provisions regarding 401K and pension regulation changes. Growing political pressure and federal deficit concerns no doubt entered into the House’s decision not to extend the COBRA premium subsidy into the bill passed last Friday.

But what this signals is the end of another automatic extension by Congress of the COBRA premium subsidy. While the COBRA subsidy has assisted hundreds of thousands of Americans, in my opinion it has been a very inefficient use of tax payer dollars.

By my calculations, had the COBRA premium subsidy legislation been designed to subsidize premiums only for those with pre-existing conditions who would have been excluded from individual plans. Those without pre-existing conditions could have purchased individual plans at premiums very near the subsidized COBRA rates.

The Feds could have achieved the umbrella protection that they intended for out of work Americans for $100 billion less, and would have enough money left over to still extend the COBRA premium subsidy through 2011 for those with pre-existing conditions. Out of work Americans would have paid the same amount for their health coverage without conditions, and taxpayers (who eventually have to repay the federal debt) would have $100 billion less burden.

Yet Another COBRA Subsidy Extension…

cb — Wed, 21 Apr 2010 20:39:17 +0000

Thursday, April 22nd, President Obama signed into law the third or fourth extension (I’ve lost count) to the COBRA Premiums Subsidy, the Continuing Extension Act of 2010 (H.R. 4851), which also extended the federal unemployment benefits and the eligibility date to the COBRA Premium Subsidy Program.

Under the signed bill, the 65% subsidy for COBRA premiums is now extended for individuals who lost their job from April 1, 2010, through May 31, 2010.

The House passed the legislation with a 289-112 vote and the Senate with a 59-38 vote.

H.R. 4851 also includes provisions that:

Extends the period that unemployed individuals may file applications for Federal Emergency Unemployment Compensation (EUC) from April 5, 2010 to June 2, 2010.
Extends from Sept. 4, 2010 to Nov. 6, 2010 the period in which individuals may claim and be paid EUC and also the period that individuals can qualify for the Federal Additional Compensation (FAC), (the extra $25 per weekly benefit amount on state and federal unemployment compensation).
Extends the period the federal government will provide 100% reimbursement for weeks of regular federal extended benefit payments from April 5, 2010 to June 2, 2010, with the state option to continue the benefit extension period from Sept. 4, 2010 to Nov. 6, 2010.

The law also directs that EUC and FAC payments be paid for general revenue, and regular employment benefits will be deducted from the EUC account, which is funded with federal unemployment taxes paid by employers.

Although this is “yeat another extension,” Congress continues to consider adopting legislation that would provide for longer extension unemployment and COBRA premium subsidy benefits. The American Workers, State, and Business Relief Act of 2010 (H.R. 4213), for instance, would extend, if passed, benefits through the end of 2010.

However, just to clarify, the new COBRA Extension Bill, H.R. 4851, DOES NOT extend the length of COBRA (18 months), nor does it extend the number of months that the 65% COBRA subsidy is available (fifteen out of the 18 months, or 9 months for TX State Continuation).

And while Democrats are hopeful of approving a permanent extension to the subsidy until the year end of 2010 vs. piecemeal extensions every six weeks, an improving economy coupled with voter concern over federal deficits may make further extensions of the COBRA Premium Subsidy more difficule to pass through Congress.

Bookmark this site for future updates on COBRA guideline changes.

Another Thirty Day COBRA Subsidy Extension Signed Into Law Helps Those Involuntarily Terminated Through End of March 2010

cb — Fri, 05 Mar 2010 20:02:36 +0000

This week President Obama signed the Temporary Extension Act of 2010, after the Senate voted to pass the measure.

The Act, generally referred to as an extension of unemployment benefits, also extends eligibility for the 65% COBRA subsidy to individuals who have involuntary terminations through March 31, 2010. Eligibility had expired for terminations after February 28, 2010. The law is retroactive, so that persons who were involuntarily terminated on March 1 and 2, are eligible for the subsidy. No other changes in the terms of the COBRA subsidy were made.

Employers and other health plan sponsors should adjust their COBRA notices to reflect the March 31, 2010 subsidy eligibility expiration date.

There is no indicationat that another extension will be approved by Congress and signed into law beyond April 1, 2010, but as of now, I wouldn’t bet against it.

Feel free to contact me if you have any questions regarding this new legislation.

Mike Chapman

214-764-6315

What Texas Businesses Must Know about the ARRA COBRA Premium Subsidy

cb — Thu, 04 Mar 2010 21:08:36 +0000

The American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law on February 17, 2009 by President Obama. The ARRA allowed for a 65% government subsidy of COBRA premiums for American workers involuntarily terminated from employment. This COBRA subsidy was extended on December 19, 2009 to continue assistance for struggling American workers. Employers are required to cover the 65% of COBRA premiums up front as assistance for their former employees. The 65% of COBRA premium assistance paid by employers are refunded by the Federal government in the form of a tax credit.

How the Employer’s 65% Share of COBRA Premium Assistance Payment is Calculated
This is best explained using a simple example:
Suppose an employee has a plan that costs $100. The COBRA premium would be $102.00 (including the 2% administration fee). The ARRA reduced premium (that the employee pays) would be $35.70 ($102.00 * 35%). To calculate the employer’s 65% tax deduction, use the following formula.

Total Equivalent Premium = (Premium Received – ARRA Ineligible Premium) / .35
Employer’s 65% Reduction = (Total Equivalent Premium – Premium Received)

Total Equivalent Premium = $35.70 / .35 or $102.00.
Employer’s 65% Reduction = ($102.00 – $35.70) or $66.30

About IRS Tax Form 941 and Claiming COBRA Premium Assistance Payments
IRS tax Form 941 is for employers to file quarterly federal tax payments and is also the way for employers to be refunded their COBRA premium assistance payments. Form 941 includes lines 12a and 12b, which is where employers claim tax credits for the COBRA premium assistance payments they made on behalf of their former employees. Employers must add up all of the COBRA subsidy payments and enter that amount for line 12a and the number of individuals provided with COBRA premium assistance on line 12b.

The ARRA COBRA Premium Subsidy creates new paperwork, compliance and financial challenges to Texas Employers.

This is just one more reason for Texas Businesses to work with a third party administrator who understands the entire COBRA legislation requirements, which can change several times in a year. Given the low cost of services from third party COBRA administrators, any Texas business that attempts to self-administer COBRA with terminated employees is being short-sighted and is taking unnecessary financial and legal risks.

COBRA Subsidy Bill Expires Again; New COBRA Subsidy Bill Extension Approval Coming Soon…

cb — Wed, 03 Mar 2010 18:24:16 +0000

Congress let the Federal COBRA Subsidy expire at the end of February. New legislation to extend the subsidy retroactive to March 1st is expected to be passed and enacted into law within the next two weeks. Federal unemployment assistance also expired February 28th but an extension is expected to be included in the same legislation that will extend the COBRA subsidy.

Combined, this legislation has a price tag of $11+ billion. This will be the second time that the COBRA premium subsidy has been extended since it was originally passed in February of 2009. The “fine print” in the legislation of the expected reinstatement is not yet available, but will be posted here as soon as it is available.

Deadline nears on COBRA Premium Subsidy

cb — Fri, 26 Feb 2010 22:23:53 +0000

The extended two-month eligibility period for the premium subsidy program is set to end this Sunday, Feb. 28, 2010. This means that workers involuntarily terminated starting March 1 will not be eligible to receive the 65 percent premium reduction of COBRA or state continuation benefits.

Many believe there is Congressional support for extending the premium subsidy eligibility period again, and expect consideration of the issue in coming weeks.

My hope is that any extension will be passed before the eligibility period ends this Sunday, to avoid another retroactive benefits period. As of this morning, the House has passed a voice vote to extend the subsidy by one month. It now goes to the Senate, but isn’t expected to pass before week’s end.

Either way, I will endeavor to keep you informed as changes occur. The premium subsidy implementation workgroup will quickly evaluate any new requirements and address the operational processes necessary for compliance, should any further extension be approved.

Mike Chapman

214-764-6315