I admit that I haven’t read the Stimulus Bill in its entirety.  I keep hearing/reading bits and pieces and those bits and pieces scare me!  For example, our government (at least most House Democrats and our President Obama) believe the Stimulus Package, HR-1, will make health insurance easier for employees after layoff via a massive expansion of COBRA .

The Department of Labor describes the “benefits” of COBRA as such:
“COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates.  This coverage, however, is only available when coverage is lost due to certain specific events.  Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves.  It is ordinarily less expensive, though, than individual health coverage.”

**DOL’s last statement is laughable, as it applies to those who are very unhealthy.**

The typical yearly COBRA payment is $12,000/yr.  Instead of $12k/yr, the proposed stimulus provides allows an ex-employee to pay only $4,200/yr. So, you have two guesses as to who is paying for the balance and how.  Ultimately, the government foots the bill; this means YOU, unless the US Government is gathering funds from secret bake sales across the Sudan.  However, it also means increased costs to all businesses; this sucks for the ones.

Workforce Management reports that this

“means employers could have as little as two weeks to make the necessary administrative changes to be able to comply with the law by the time health care coverage decisions take effect, as they normally do, at the beginning of each month.

The mechanics of complying with the law appear to be straightforward: An involuntarily terminated employee who chooses to extend coverage would pay 35 percent of the total cost of his or her health insurance; the employer would cover the rest. Employers would then deduct that amount from the payroll taxes the company wires to the Internal Revenue Service the following pay period.”

I do not own a small business, but I can only imagine what kind of administrative nightmare that this imposes on them. Woopty frigging do that the companies get this back almost immediately; it’s an unnecessary burden to put on any business when they are already hurting.

Because the ex-employee will be paying $4,200/yr, they have little incentive to find more affordable plans…which are out there!  More folks are going to feel like they cannot make it without the government and become slaves to the dole.  I’m guessing that the more than $30B for this program is going to look like chump change if it rolls out in its entirety.

Health Insurance and the Stimulus Package
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3 thoughts on “Health Insurance and the Stimulus Package

  • It really is a scary proposition for small business owners. We have already seen some of the ramifications. As you said, in the first place, the business has to front the premiums before being paid back from the government (for an employee that was terminated either for cause or because of down-sizing).

    On top of that what we’ve seen in the past month is that Third Party Administrators (TPA’s) who the small businesses are using to run their COBRA programs are charging a monthly per enrolled ex-employee a fee to administer this new guideline. I have seen fees so far ranging from $4 to $6.

    Seriously, I know the systems. They are computerized. It does not cost these TPA’s that much more (if anything) to implement this. There are no guidelines or controls and they are just gouging by charging these additional fees.

  • i hope that those Stimulus Package coming from the government would really kick start the Economy. the economic recession has been very bad on my business. “

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