Does COBRA Stimulus Apply to Small Business Who Drop Coverage?

[dgoldenz]

Anyone have any idea if employees of a small business (less than 20 people) are eligible for the 65% premium reduction in Virginia if the employer terminates the group plan? This is relating to the state "Mini-ARRA extension" that was just passed, and gets reimbursed to the carrier rather than the employer. Does this work if they accept a HIPAA issue plan? I was going to call Anthem but they are closed.

 

[moonlightandmargaritas]

If the employer terminates the group plan, irrespective of the size of the group, there is no COBRA option, and therefore no subsidy.

HIPAA GI plans don't qualify.

 

[Dave020]

It's all irrelevant anyway, Viriginia is one of the states with no state mini-COBRA program. Groups under 20 in VA have no state continuation option, thus no subsidy even if the group were in place.

 

[djs]

Common sense would say that if a small group (or large group) could drop coverage and get their employees covered under a 65% subsidy, that every business would be dropping coverage.... and quickly.

Unfortunately, the government doesn't always use common sense.

Fortunately, in this matter, I'll defer to Dave and Moon, who know far more than I do when it comes to cobra (and almost anything medical insurance related). I got to admit, I don't know anything about VA rules.

Dan

 

[moonlightandmargaritas]

Unfortunately, the government doesn't always use common sense.

How come nobody told me?

 

[djs]

How come nobody told me?

It was the governments responsibility.

 

[somarco]

Quite a few business owners will drop coverage once the burden of subsidizing coverage for past employees get's too great.

 

[dgoldenz]

This is from an update by Anthem on April 14th:
Under the Act, the 65 percent federal subsidy also applies to state continuation coverage premiums for qualified individuals who were involuntary terminated from employment between September 1, 2008, and December 31, 2009. On April 8, 2009, the Virginia General Assembly passed a bill proposed by Governor Kaine ("VA Enhanced Continuation") that creates a more expansive state continuation opportunity for those individuals enrolled in group coverage issued to small employers that are not subject to COBRA who are involuntarily terminated from employment, provided that such individuals qualify for premium assistance under the Act. The premium for this coverage is to be collected monthly and may be up to 102 percent of the premium normally applicable for the coverage. New section 38.2-3541.1 of the Code of Virginia, which was effective upon enactment, is available on page 3.
As the carrier, Anthem is responsible for the 65 percent premium on all assistance eligible individuals ("AEIs") participating in VA Enhanced Continuation under its group policies. Anthem is responsible for administering the subsidy and seeking reimbursement from the Department of Treasury through Anthem's payroll taxes. The coverage for an AEI is available for a maximum of 9 months beginning:
•
on the date of notification (which must be made by April 18, 2009) of the availability of the premium assistance for AEIs involuntarily terminated between September 1, 2008, and before February 17, 2009;
•
on the date of notification (which must be no later than 60 days from the date of involuntary termination) for AEIs who were terminated between February 17 and April 8, 2009; and
•
on the date of involuntary termination if the termination occurs after April 8, 2009. An AEI who is involuntarily terminated after April 8, 2009, must be notified of the availability of premium assistance within 30 days of the termination date.

 

[Dave020]

Thanks for the tip. This is brand new and now I can update my mini-COBRA page to reflect it.

Looks like a new 9-month state continuation program.

Is it actually on the books yet or still to be put into effect?

 

[Guest]

I would not be surprised to see the dropping of group coverage to avoid COBRA-forward payments on these people as a viable strategy.

Face it. If a small company terminated 20 or 30 people last December and now has to front the cost of COBRA for these people... AND if the company can't afford it AND can't get a line of credit to pay it (seeing as the banks are shy of risk), it looks like the company could drop their current plan. That would "kill" their COBRA liability.

Say the company is living off of retained earnings hoping to hold on through the recession. Along comes a new up-front payment that won't get reimbursed until who-knows-when, perhaps management will just drop their group plan... and with it... COBRA.

So what would then prevent them from simply writing a new plan for it's current employees a month after dropping the old plan?

Am I missing something here?

Al