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What Are Cobra Premium Assistance Payments?

Paying health insurance premiums through a group insurance plan can be costly especially if family members are added. The health care premium cost may skyrocket way beyond what the average income can afford if an individual loses their job and struggles to make ends meet. There is assistance with these rising health care costs for those who are in need and for those who qualify for these benefits.

  1. What is COBRA?

    • The federal law known as the Consolidated Omnibus Budget Reconciliation Act of 1985 created the right to continued insurance coverage for an individual. COBRA gives workers and their families who lose their health benefits access to group health benefits provided by their former group health plan for a certain period of time.

    Premium Assistance Plans

    • According to the Department of Labor, the American Recovery and Reinvestment Act of 2009 provides payment assistance to qualified individuals who elect COBRA health benefits. This premium reduction is not available for individuals who are terminated or fired after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums up to 15 months, as long as they are not eligible for another plan or Medicare. The American Recovery and Reinvestment Act also provides a 65 percent reduction in the premium otherwise payable by involuntarily terminated individuals (laid off, not fired or voluntarily quit) and their families who elect COBRA continuation health coverage.

    Premium Reduction Eligibility

    • According to the IRS, premium assistance is also available to individuals between the ages of 55 and 65 who receive Trade Adjustment Assistance benefits and receive pension payments from the Pension Benefit Guaranty Corporation, a government-sponsored organization designed to protect the retirement incomes of its members. The TAA benefits program was created to help trade-affected workers who have lost their jobs due to increased imports or shifts in production out of the United States. These individuals qualify for the Health Care Tax Credit. The HCTC pays 80 percent of health insurance premiums for qualifying individuals.

    Qualifying Events

    • According to COBRA, if an individual is an employee, that individual and their children become a qualified beneficiary if they lose their coverage under their existing insurance plan. The events that qualify an individual and their children for assistance are as follows: reduced hours; employment is terminated (not fired); their spouse or parent dies; their spouse or parents hours are reduced; spouse or parents' employment is terminated (not fired); spouse or parent becomes eligible for Medicare benefits (under Part A, Part B, or both); and the individual becomes divorced or legally separated.

    Limitations

    • According to the IRS, if an individual qualifies and receives premium assistance and their adjusted gross income for the tax year exceeds $145,000 (or $290,000 for joint filers), the premium assistance amount must be repaid. Also, ARRA stipulates that the premium reduction is limited to coverage that began on or after February 17, 2009 and lasts for up to 15 months.

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