The Hidden Cost of the COBRA Subsidy
Last February, the Federal government passed legislation to provide terminated employees with COBRA benefits at a reduced rate. Normally, the former employee is required to cover 102% of the premium each month. The Federal government agreed to subsidize these individuals by covering 65% of the premium for up to 9 months, thus allowing more unemployed workers to continue their health care benefits at the reduced rate of 35% of the normal premium.
The Fed agreed to allow companies to recoup the 65% by taking credits from their 941 reporting form, (representing the 65% credit) essentially reducing that company’s tax liability so they were not out of pocket.
On an overview level, it seems like a win-win situation. Unemployed people get to keep their benefits going, and it doesn’t cost their former company any additional money.
Because the Fed reduced the COBRA premiums, many more unemployed people were able to continue their benefits. The people most likely to continue their benefits through COBRA had ongoing health conditions that require treatment, medication, surgery and tests. These COBRA participants, on the whole, have higher health care costs. One carrier reports that the loss ratio for their COBRA participants is 200%. In layman’s terms, this means that for every $1 that the carrier collected in premium, $2 was paid out.
Although from a premium perspective this appeared that it would not cost the group any money for the Fed to offer this benefit, in fact it will cost everyone who has health insurance as the carriers will be increasing trend to account for these large losses.
Additionally, the Fed has extended the subsidy until February 28th in an amendment passed with the Defense Spending Act. The amendment also provided 15 months of subsidy instead of the original 9 months. Terminations for dates on or afterFebruary 28 will be charged the whole premium.
COBRA Subsidy Extension News
November 16, 2009
The extension will provide for COBRA eligible individuals and their families to continue their insurance benefits at 35% of the normal premium rate. The bill provides for an extension of 6 months, making the subsidy period 15 months instead of the originally enacted 9. The bill retains the 35% rate for the participant.
In order to qualify for the subsidy, the employee must be laid off or terminated by February 27, 2009, with coverage ending on that date. Should the employee be terminated on February 28, then there is no subsidy available as their first date of no coverage would be March 1st. Some carriers maintain an end of month policy, meaning if the employee gets terminated any time in February, coverage would end on the 28th and the former employee is uneligible for the subsidy.
Ohio's HB 1 Changes Adult Unmarried Children's Access to Coverage
The state of Ohio has stepped in to extend coverage to adult unmarried children up to the age of 28, regardless of student status. The state has been tracking an increase of unemployed adult dependents following college graduation and saw a need to provide coverage.
The first group medical insurance renewal on or after July 1, 2010 will provide this provision in compliance with the directives of HB1. The unmarried adult dependent may come on to the plan without a qualifying event at the open enrollment period associated with the group's plan renewal. Note that adult dependents will be subject to pre-existing exclusions for up to one year. If the adult dependent had prior coverage, then credit can be issued to waive the pre-existing exclusions.
The state of Ohio has further clarified that this bill applies only to medical coverage. Dental and vision plans are not affected by this change. The state anticipates that this will provide access to medical coverage for approximately 20,000 unmarried adult dependents.
HB 1 Mandates Pre-Tax Coverage Options
Employers with 10 or more employees must offer uninsured employees the opportunity to purchase coverage with pre-tax dollars. By allowing employees to contribute to their health care premiums with pre-tax deductions, they can reduce their tax liability. This will be phased in beginning January 1, 2011.
Cor-Ben Consultants is a licensed third party agency with the Ohio Department of Insurance. We are able to provide the plan documents and election forms that your company needs in order to comply with HB 1.
COBRA Stimulus Update
For those that qualified for the subsidy, the deadline for the initial application period is near. If you elected COBRA on or after September 1, 2008, then you were eligible for the subsidy effective March 1, 2009. The subsidy period is 9 months. Persons who elected the COBRA susidy for an effective date of March 1 should note that their subsidy period is over as of November 30, 2009. COBRA persons may continue their coverage beyond that point at the full cost for up to the 18 month period stipulated in their COBRA paperwork.
Please call us with any questions. We appreciate your business.
Managing Your Company's Healthcare Costs
In 2007, over half of insured Americans were taking prescription drugs to treat at least one chronic health problem, according to Medco, a leading pharmacy benefit manager. The good news is that people are receiving treatment which can help prevent problems down the road, however with a projected drug utilization increase of 2-3% this year and the same amount again in 2009 and 2010 pharmacy benefit insurance costs are expected to increase by a minimum of 4-6% during this year and continuing.
Treatment for high cholesterol and high blood pressure were the most commonly used medications for 15-20% of Americans. The top driver of increasing prescription drug costs however, is for treatment of diabetes. There is no doubt that rising rates of obesity among Americans are having a major impact on our health, and on rising insurance premium costs.
There are no easy answers in today's insurance market. Business owners need a broker that understands their company's demographics, budgetary requirements, and health history. Armed with this information, Cor-Ben Consultants then searches for a plan to fit your company's needs.
We offer products from the names you recognize-United Healthcare, Anthem Blue Cross, Medical Mutual of Ohio and Aetna. A new player in our market is Significa Insurance Group, and their plans have offered substantial savings to our clients while maintaining good benefits. We are also an appointed broker for United Healthcare's new ERC program which reduces premiums when the employees participate in a health survey and create wellness goals.
Additionally, we offer Health Savings Account plans, and employer sponsored deductible reimbursement programs, Flexible Spending Accounts, and COBRA administration. We are your virtual HR benefits department, handling the day to day insurance needs of your employees, freeing up your time to work on what's important-your business. For a free, no obligation evaluation, call Gregg Mann at 614-326-7356 or 800-589.1418.
Graduation Can Be Hazardous to Your Health Insurance
Twenty percent of adults aged 19 to 29 do not have health insurance. That's one in five! The reasons why? "I don't need it" (the "I'm invincible and indestructible" argument), "It 
costs too much" (the "I'm not sure if paying $50 dollars now to avoid paying $10,000 later is a good idea" argument), and "It will cut into my beer money" (or the "It will cut into my beer money" argument).
Kiplinger magazine contributing editor Erin Burt says if you're dropped by your parents' plan (at age 19 if you don't go to college, college graduation, or when you turn 23 for most Ohio insurance companies), you can still get good, affordable coverage on your own.
Going without coverage is downright risky, says Burt -- not only for your health but also for your finances. One out-of-pocket visit to the emergency room for an accident or illness could cost you hundreds or thousands of dollars, not including the cost of any follow-up care you may need.
So if you're graduating from college this year or have a birthday soon, your free ride may be coming to an end, so act now to avoid leaving yourself vulnerable.
Burt suggests these three options to fill that gap.
Extend your current coverage under COBRA. Ask your parents to contact their benefits office and ask about COBRA, the federal law that allows an adult child to remain on a parent's policy for up to 36 months (18 in most cases). Upside: If you have a health condition, you won't be denied coverage. Downside: it can be expensive: COBRA coverage can cost between $200 and $500 a month. Options: If you are in good health with no chronic conditions, you might be better off buying individual coverage.
Consider a student policy or short-term coverage. This used to be the go-to solution for new grads looking to bridge the gap between graduation and a job with health benefits, says Burt. But she warns they too may not be the best deal. A new study by the Government Accountability Office found that student health plan annual premiums can range from $30 to $2,400, with some plans excluding or limiting preventive care, prescription drug coverage and other basic health services.
Shop for an individual policy with a high deductible. It can cost as little as $50 to $150 per month. Such plans carry no expiration date like student and short-term policies do. And benefits can be tailored to fit your needs, so it pays to shop around. For example, by purchasing insurance with a deductible of at least $1,100 for individual coverage, you may qualify for a Health Savings Account (HSA). An HSA lets you make pretax contributions to a bank account (literally a Medical IRA) and use the money tax free to cover your deductible and other out-of-pocket medical expenses. Any unused money rolls over from year to year. Health Incentive Accounts can also make sense. This type of policy pays you if you remain healthy. I once quoted an HIA for a young man where the annual credit toward his deductible was more than the annual cost of the policy! In essence, the insurance company was paying him to take their insurance!
Parents of grads often need to be the ones to initiate this conversation, so we suggest several strategies:
Get them set up on a plan. It's a reality that twentysomethings don't always know what they don't know about life, risk, sickness, and injury.
Offer to pay the first two months premium. Your nudge will pay dividends in the long run, especially if they need to use their coverage.
Set up a time for them to talk with a professional. This will empower them to act on their own. It also reinforces the fact that they are adults. When you can say "I have an insurance agent," you are pretty much an adult.
Questions? Do you have a grad who needs coverage now? It just makes sense to give us a call. Contact Joelle Burwell at Cor-Ben Consultants, 1-800-589-1418 or via email jburwell@corbenconsultants.com.
Need Individual Insurance? Anthem insurance quotes now available online, click here...
Are you on track for financial stability at retirement? 
Reviewthe Nationwide RetirAbility check to see how you're doing. You can access the RetirAbility check below .
How to Reduce Healthcare Costs- The cost of running a business in today's world is climbing. Higher fuel prices, competitive employee salaries, electricity-everything costs more. Many of those costs cannot be reduced.
However the cost of healthcare for your employees is a variable cost. You can make smart decisions to control those costs while still offering good benefits to your employees. At CorBen Consultants, we show you ways to reduce your bottom line health care costs without sacrificing benefits.
Have you explored the new HRA (Health Reimbursement Account) options? These plans have a higher deductible with lower premiums. You then fund a portion of the deductible for reimbursement to the employee. Most of our clients are realizing between 25% to 50% reduction in overall healthcare costs with this option.
Have you explored the HSA options? A health savings account offers lower premiums and employees then contribute funds to their HSA account to pay for those medical expenses after they are incurred. Unlike a Flexible Spending Account, the HSA plan is not "use it or lose it". The HSA remains with the employee for as long as they wish. Money saved in the account that is unused at retirement age can then be withdrawn for any expenses-not just medical ones.
We are able to provide a free competitive quote to your group to show how these options could reduce your costs. If you have a budgeted amount for healthcare, give us that budget amount and we will present you with options that fit your needs.
We offer more than just insurance. Our products and services are designed to meet the needs of the small business owner. To view our services, or to compare them to what you have now, click here.
You're #1 With Us
At Cor-Ben Consultants, our clients are the #1 priority. We specialize in service that goes far beyond comparing rates and benefits of group plans. Our dedication to service continues to make us one of the top 10 health insurance agencies in central Ohio.
Have you explored the options to save money while still offering good benefits? We offer plans to help you save. Call us today!
Small and medium sized companies want to compete with big companies for good employees. Benefit plans that include medical, dental and vision are a start. Life/AD&D, short & long term disability products that protect your employees' income are important, too. Our agency works with the top carriers in the nation. Names that your employees know, recognize and have confidence in.
Cor-Ben Consultants Inc. has been servicing employee benefit plans for over 30 years from our office in Columbus, Ohio. Experienced professionals combined with caring and conscientious people - the kind of people you can depend on. We are committed to a high standard of excellence in all that we do and to establishing a firm relationship of mutual trust and service with each of our clients.