scottfanli
Expert
- 56
New Cobra Vs New Group - Oops
- Thread starter djs
- Start date
- Thread starter
- #12
Well, with a bit of exaggeration...
Take a group of 5, layoff 3 and move them to cobra. If they had dependents, a decent health plan, whatever, the employee cobra costs could be say $600 x 3 = $1800 * 65% = $1170 / month tax credit.
It is unlikely the 2 remaining employees have a monthly employee tax of $1170 a month to offset the cobra cost.
I haven't done the math with enough accuracy to know where the break point is, I just know there is a problem here.
Dan
Take a group of 5, layoff 3 and move them to cobra. If they had dependents, a decent health plan, whatever, the employee cobra costs could be say $600 x 3 = $1800 * 65% = $1170 / month tax credit.
It is unlikely the 2 remaining employees have a monthly employee tax of $1170 a month to offset the cobra cost.
I haven't done the math with enough accuracy to know where the break point is, I just know there is a problem here.
Dan
- 3,384
Groups under 20 full-time employees are EXEMPT from federal COBRA and may fall under state mini-COBRA programs depending on state. I see not provision in this legislation that requires any state to mandate 65% payment by employers in the 2-19 (or 10-19 in Ohio, what's up with that, Chumps?) group size. Mini-COBRA generally mirrors federal COBRA, however it is up to each state on how they set it up.
In your example it is irrelevant as a group that small would not fall under federal COBRA requirements anyway.
In your example it is irrelevant as a group that small would not fall under federal COBRA requirements anyway.
- 3,384
I am curious about that myself. Most of my groups are under 4 employees total, mostly spousals and such, so I expect no change in that marketplace.
Since not all states even have a mini-COBRA program, I suspect that at under 20 state level, no changes will occur.
Since not all states even have a mini-COBRA program, I suspect that at under 20 state level, no changes will occur.
Mini COBRA in Georgia only runs 3 months. If they mirror the federal mandate what happens after 3 months?
Who knows.
I still think this is a mess and only going to get worse.
On a (somewhat) related topic, my dentist does not accept Medicare/Medicaid pts because the reimbursement level is so low. He said there is talk the govt will force providers to take M/M patients and if they don't their payroll taxes will increase to a punitive level.
Who knows.
I still think this is a mess and only going to get worse.
On a (somewhat) related topic, my dentist does not accept Medicare/Medicaid pts because the reimbursement level is so low. He said there is talk the govt will force providers to take M/M patients and if they don't their payroll taxes will increase to a punitive level.
- Thread starter
- #17
Yes, maybe only federal cobra will be affected, same problem still exist when the right numbers are plugged in.
A group of 20 that reduces to 15 may not have enough payroll taxes to offset the cobra costs. I think once you get over 50 employees, this becomes a hard problem to hit, since laying off enough employees probably means you went out of business. It happens though.
Most of my groups are 3-5 employees as well, with several spousal groups. Not to many going anywhere, except to continue to struggle to pay the bills.
Dan
A group of 20 that reduces to 15 may not have enough payroll taxes to offset the cobra costs. I think once you get over 50 employees, this becomes a hard problem to hit, since laying off enough employees probably means you went out of business. It happens though.
Most of my groups are 3-5 employees as well, with several spousal groups. Not to many going anywhere, except to continue to struggle to pay the bills.
Dan
- 3,384
Hey Bob, you are right. I meant to mirror the overall intent of federal COBRA by providing some level of continuation. There are a lot of states with very low continuation periods, 2 months, 3 months, 6 months and so on. Each state has the right to enact or not on mini-COBRA. Ohio, Chumps's state, sets the bar at 10 or more employees. 2-9 don't even exist there. Other states, like CA, go to an extreme and mandate 36 months on all mini-COBRA plans and many federal COBRA plans with the extension option under AB 1401. There are also several states which have no mini-COBRA program at all.
Payroll penalties for federal level employer groups are going to hurt. If they drop group, they will probably get hit with a payroll tax penalty. Danged if you do and danged if you don't.
The 65% is not a huge concern as most employers are paying at least 50% contribution anyway so the extra 9 or 12 months won't absolutely kill them (assuming the economy gets better LOL), The bigger concern is those who are allowed to remain until age 65. Imagine an employer having 10 people on continuation indefinitely and they are all running up claims big time. The group will get killed on renewals every year. Eventually....well.
Payroll penalties for federal level employer groups are going to hurt. If they drop group, they will probably get hit with a payroll tax penalty. Danged if you do and danged if you don't.
The 65% is not a huge concern as most employers are paying at least 50% contribution anyway so the extra 9 or 12 months won't absolutely kill them (assuming the economy gets better LOL), The bigger concern is those who are allowed to remain until age 65. Imagine an employer having 10 people on continuation indefinitely and they are all running up claims big time. The group will get killed on renewals every year. Eventually....well.
- 1,271
Dave,
when I read the link it sounded like employer would be paying 65% on top of usual 50% subsidy and also says eligible individuals are entitled up to 9 months only??
- 3,384
I think the example on there is for someone who is receiving a severance package with some "consideration". Employers are not currently required to fund any portion of the COBRA premium (at least until this 65% rule kicks in). Sometimes, employers will help out an employee with a severance package related to time of service. Say, one month of COBRA for every 2 years employment, something like that.
From what is posted there, it sounds like that is about how it would work under that special circumstance. Most often, severance packages include much higher funding for the period of COBRA covered under the package. ExampleL 6 months COBRA employer paid then you are on your own for the next 12 months after that.
From what is posted there, it sounds like that is about how it would work under that special circumstance. Most often, severance packages include much higher funding for the period of COBRA covered under the package. ExampleL 6 months COBRA employer paid then you are on your own for the next 12 months after that.
