On November 30, the government COBRA subsidy expired.  This subsidy helped those individuals who  were involuntarily terminated between September 1, 2006 and December 31, 2009 afford continuing health benefits from their previous employer.  Through the program the government paid 65% of the COBRA coverage for nine months or until the individual was eligible for new group health insurance coverage.

When the program went into effect on March 1 of this year, I am sure the government felt the economy was in recovery mode and that jobless claims would be decreasing so this stop gap would be enough to make it through the worst.  Unfortunately the unemployment figures are still at a very high level.

Both the House and Senate have passed (check that, they have proposed and both bills are in committee at this point 12/4/2009) additional funding bills to extend the program, and establish a future for any additions to the unemployment ranks.  Both bodies have proposed an extension of 6 months, and an on going program to provide coverage for employees laid off from January 1, 2010 through June 20, 2010 to have 15 months of eligibility for the premium subsidy.  Both programs would provide retro coverage in the event the extension bill would pass.  One of the main differences is that the Senate has proposed increasing the subsidy to 75% while the House would maintain the 65% subsidy level. 

While experts are very confident that the extension bill will pass, they are not sure when the finalized version would be sent to President Obama for his signature.  We all know it won’t be before the current program expires (unless we get Mr. Peabody’s way-back machine in working order).

The challenge that many companies are facing now is that the subsidy did expire on November 30, and currently the former employee would be responsible for 100% of the premium if they elect to remain on your plan. 

It’s an additional financial risk that your organization is faced with.  First you will need to identify the probability of the extension’s passage.  Then you would need to factor in the cost or reimbursement and/or interest payment if you bill for 100% and the extension is passed compared to the additional cost for re-billing and potential default, along with the cost of the money your organization “loaned”  to make the overall payment if the extension is denied.   Additionally you would need to consider the impact to your company’s reputation, not so much to the outside world, but to your staff and the repercussions it can have on employee morale and retention.

So, how are you planning on addressing this situation?  Do you bill for 100% of the COBRA premium and credit/reimburse if the extension goes through or do you maintain the 35% billing and re-bill the additional amount if the extension is defeated?   Please participate in our survey, or leave a comment and share your thoughts on this topic.

UPDATED INFORMATION 12/3/2009

I was incorrect in my statement that the bills have passed each area of congress, they are actually have been referred to committee and are currently waiting for approval before moving towards approval.  This may actually take a bit more time than was anticipated.   The House version is H.R. 3930 and the Senate is S.2730.

UPDATED INFORMATION 12/24/2009

As an addition to a Defense Spending bill, the extension of COBRA benefits has been authorized and signed into law by President Obama. 

Our poll on company readiness for the change indicates that the companies who participated in the survey had not established a plan.  If you would like to still participate in the survey, it will be open until January 3, 2010.