Monday, January 26, 2009

COBRA Changes in Stimulus Will Bite Employers

In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress. - John Adams

IGoogle has a neat new feature that includes 3 daily quotes on my home screen and I chuckled at the one above because in these turbulent times the world needs humor and most of us enjoy using our attorney friends for fodder right?I stopped laughing when I read later today about the proposed reforms to COBRA being considered in the US Congress in the form of "The American Economic Recovery and Reinvestment Tax Act (H.R. 598). Namely, there are two potential components of the stimulus package relating to COBRA being debated which will have a serious impact on Employer Health Plan Expenses;

  1. Having the taxpayer fund 65% of the cost of COBRA for employees who lose their job for 12 months or until new coverage is obtained.

  2. A mandate for employers to make COBRA available until employees who are both 55 with 10 years of service are Medicare Eligible or secure alternative coverage.

The HR Policy Association has a nice summary of all the reasons such proposals would be estimated to expand COBRA costs by an estimated $65B as well as directly impacting employer health plan costs via adverse selection I strongly suggest you read.

By continuing to expand the scope of COBRA on the backs of the taxpayers and employers the Congress will quickly create just another Cost shift on those who work for a living. John Adams was a wise man.

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