New Cobra Vs New Group - Oops

[djs]

I was just reading over the rules for the new cobra program. Clear as mud.... but....

It became obvious I didn't do a small group any favors when I took 2 of 3 employees off of Cobra on January 1, and wrote a 3 person group (plus dependents). The 3rd had an IFP plan, he pays about the same either way.

Moving them to group saved them money vs Cobra, actually, considerable money. Now, with the new Cobra subsidies, it is costing them money compared to what they would pay if they had stayed on Cobra.

Oh well, who could have figured that my good ole Uncle Sam would through money around like this....

Moral to the story: Writing small group right now may not do your clients any favors if they are on Cobra. On the flip side, having clients that have ex-employees on Cobra is a miserable thing, since the employer has to make up the 65% and then someday, the government will figure out how to get that back to them via payroll tax credits.

By the way, the math doesn't work for a small employer who has employees on cobra who is paying the 65% out of pocket and getting payroll credits for reimbursement. If they have 5 employees, get rid of one, there may not be enough payroll to get the credit on.

Dan

 

[somarco]

the math doesn't work for a small employer who has employees on cobra who is paying the 65% out of pocket and getting payroll credits for reimbursement. If they have 5 employees, get rid of one, there may not be enough payroll to get the credit on.

Peeler posed that question in another thread. I suppose it depends on:

How many ee's remain on the payroll.

How many former ee's elect COBRA.

How much payroll is generated on the active ee's.

And probably a bunch of other things I have not considered.

The law seems to apply only to employees in a rather narrow window (at least for now). Those who were involuntarily terminated 9/1/08 - 12/31/08 and earn less than $125,000 as a single ($250,000 married).

I have a few questions of my own, such as . . .

What if someone did not elect COBRA, or pick up other coverage, and had a large claim? Say they paid part of the claim? Do they retroactively apply for COBRA then file the claim with the carrier for reimbursement?

How does the employer handle COBRA premiums already paid by the employee? Do they issue a check to the employee or what?

What if the former employee purchased individual major med in the interim? Do they cancel that retroactively, and pick up COBRA? What about claims paid by carriers in the interim? If those claims exceed premiums collected, what happens then?

 

[ozmo]

where are you finding the actual "rules" to the new COBRA..I have not found them on a google search.

 

[ABC]

Where are you guys getting this Cobra Info?
I have had two different sources telling me they are not saying anything untill the Gov clears things up and that includes the IRS.
At least 30 days before we hear something. I think it will be longer.

 

[djs]

Word & Brown put out a pretty good summary of the new rules. Okay, it's not the verbatim rules, but it gives the best overview I've seen so far (without the spin).

http://www.wordandbrown.com/inbox/newsletters/ComplianceFlashAmericanRecoveryReinvestmentAct.pdf

As with everything the government does now, it only fits a pretty narrow group as Somarco pointed out. Turns out, the group I wrote, 2 of the 3 employees fell into this group. One because of a job shift (new job didn't offer group until I wrote it), the other because he was on his wife's Cobra (started Dec 1) until they both went on this new group.

I don't feel I did anything wrong, just I realize at this point, I didn't save them the money that we had discussed.

Oh well.....

 

[somarco]

Here are some places I found. Of course, no one knows, especially Washington.

Employer Paid COBRA Subsidies in the Economic Stimulus Bill: Initial Action Plan : Employee Benefits Legal Blog

Compensation Force: Approved Stimulus Bill Includes Employer Subsidy for COBRA Premiums

Obama signs stimulus bill providing COBRA subsidy | Business Insurance News, Analysis & Articles

Would be nice if someone had actually bothered to READ what they voted on, and then taken the time to research the consequences.

But that would be expecting something rational from Congress.

Silly me.

 

[djs]

Silly me.

Well said

 

[ABC]

This new cobra is a mess.

How can the Gov. ask companies to pay the 65% of the cobra? Then just give the a payroll tax credit.

What if they don't have the money?

I have blue collar accounts that have laid off 60-75% of their work force. WTF

Not to mention going back to Sept 08 people can now re apply for cobra coverage.

Does B.O. have any idea of the administration nightmare he just created or the cost to the small employer?

This is just one of the many horrible aspects of this spending bill.

 

[somarco]

Does B.O. have any idea of the administration nightmare he just created or the cost to the small employer?

As my dad used to say, "ask a stupid question, get a stupid answer . . ."

It seems that Presbo and his merry men are trying to bankrupt small businesses and/or force them to cancel all group insurance.

If I were an employer, that is what I would do.

A buddy weighed in on this. He thinks the final deal will apply to medical, dental, vision, HRA and possibly HSA deposits as well.

Having fun yet?

I know I am.

Which ***'s other than Al voted for this mess?

 

[djs]

Which ***'s other than Al voted for this mess?

Almost every democrat in congress and 3 republicans.