Pfizer said it would cut 8000. Sprint/Nextel cut 8,000. Home Depot cut 7000. Since October 2008. "22 of the 30 companies that are part of the Dow Jones industrial average have announced job cuts since the economy took a nosedive in October." (Washington Post, Layoffs CutDeeper Into Economy As Recession Hits Most Industries, CorporateGiants Slash Jobs, by Annys Shin and Neil Irwin, January 27, 2009.) Companies are struggling to stay afloat and their alternative to going under is to get rid of their most valuable asset: their employees. But the strain is not only on the employer, it affects the millions of employees who have or will be laid off from their jobs. Being laid off adds an insurmountable strain to an individual's ability to make mortgage payments, pay their credit card bills, and care for their loved ones by providing health insurance to their families.
The recent stimulus bill signed into law (also known as the American Recovery and Reinvestment Act) by President Barack Obama will help employees who were involuntarily terminated afford health care for themselves and their families. Before this bill was signed into law, employers were required to provide continuation of an employee's health benefit throught the federal law called the Consolidated Omnibus Budge Reconciliation Act (COBRA). COBRA required companies to continue offering health insurance coverage to their covered employees, spouses, and dependents in certain situations when a loss of coverage occurs. Employers did not have to cover the entire cost of coverage; therefore most employees paid for the premium in addition to the administration fee of 2% bringing the total to 102% of the cost.
This new bill adds some relief to the 102% payment that some of the eligible employees would have to pay. Simply put, an employee who is involuntarily terminated by their employer is now eligible to receive a government subsidy of 65%, which means that after the employee pays the ~2% administration fee they are only left to pay about 35% of the cost of continuation of their health coverage with their company. When will this begin? This subsidy begins on or after February 17, 2009. How long will it last? The government subsidy is set to last for 9 months. Who does it cover? Only employees that were involuntarily terminated from their jobs. (There is no subsidy for voluntary terms, employees that make over 125,000 single/250,000 couple) However, the subsidy for eligible involuntarily terminated employees will end earlier if the employee signs up for health insurance with a new company, if they are eligible for Medicare, if they do not make the payments, and if the COBRA maximum period ends.
ROLE of the employer:
Employers need to get moving on this. They need to identify which employees were involuntarily terminated on or after September 1, 2008 and are eligible for COBRA. They need to provide a communication plan or an explanation to send out to these employees who are eligible. Employers need to get their house in order. Contact payroll and your COBRA administrator to find out what they are doing to comply. If not, you may be have to provide a refund to employees or their dependents that have overpaid.
ROLE of the employee/involuntarily terminated employee on or after 9/1/08:
Be proactive at your job. Understand what your company is doing to make sure you receive this subsidy in the event that you are involuntarily terminated. Plan ahead to cover your expenses and make sure that you have a small cushion ready in the event that something like this happens.
As always,
Prioritize, set boundaries, and live!
By: Tricia Riviere
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