Governor Rell Urges Changes to Help

Unemployed with COBRA Coverage

            Governor M. Jodi Rell today called on the General Assembly to modify Connecticut’s insurance laws to take advantage of a provision in the federal stimulus package that makes it much less expensive for people who lose their job to keep their health insurance under the law known as “COBRA.”

            “Workers who lose their job often lose their health insurance at the same moment, making COBRA coverage a necessity for many,” Governor Rell said. “Yet continued insurance under COBRA is often incredibly expensive. We are doing everything we can to support people who are looking for work and this change – which would reduce the cost of COBRA by nearly two-thirds – is one way we can help. By making a minor change in the law we can have a major impact on the lives and the finances of people who are struggling right now to make ends meet.

            “The loss of a job is a devastating blow in its own right – and for many people the status of their health insurance only adds to their sense of worry and dislocation,” the Governor said. “We can lift at least one of these burdens from the many people who have been hit so hard by the national economic crisis. This is something the General Assembly needs to do as soon as possible.”

            COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, passed by Congress in 1986. Among many other changes, that law allowed laid-off employees at companies with more than 20 workers to keep their health plan if they continued to pay the full cost of those benefits. However, because most companies pay the bulk of the premiums for their workers, many laid-off workers found the cost of continuing coverage under COBRA to be prohibitively expensive.

            Under the stimulus – the American Recovery and Reinvestment Act of 2009 (ARRA) – the cost of COBRA benefits for a laid-off employee is reduced from 100 percent to 35 percent. The employer must continue to pay 65 percent of the cost, but receives a tax credit for that expense.

            The stimulus package also made it cheaper for workers at small businesses – that is, employers with fewer than 20 employees – to get COBRA benefits. Workers laid off from small businesses also pay 35 percent of the cost of COBRA, while insurers pick up the balance and receive a tax credit for that amount.

            Ordinarily, laid-off workers must choose to continue their benefits under COBRA within two months of losing their job. But under the stimulus, workers laid off from large companies any time between September 1, 2008, and February 16, 2009, have the option to enroll in COBRA retroactively.

            Because some states – including Connecticut – have what is known as a “mini-COBRA” law, employees laid off from small businesses cannot take advantage of the retroactivity provision unless the state law is changed.

            “Apart from the obvious and necessary benefit to the Connecticut families, it should also be noted that this change will have no cost to the state and may even save us money,” Governor Rell said. “I strongly encourage the Legislature to act on this immediately.”