Health Insurance Assistance for the Unemployed
Workers who were involuntarily terminated from employment (other than for gross misconduct) between September 1, 2008 and May 31, 2010 may be eligible for a 65 percent subsidy of their COBRA premiums for up to 15 months. That’s right. If you were laid off during this time and want to continue your health coverage, Uncle Sam will pay most of the cost for you.
For example, if you would otherwise have to pay $1,200 a month for family coverage under COBRA, your cost would have dropped to $420. The feds pay the other $780. Since the subsidy can last for as long as fifteen months, this would be worth more than $11,000 in this example. (Employers actually have to pay the 65 percent federal share for you, then recover their outlays by reducing the taxes they pay to the government.)
A federal law known as COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985) generally requires companies with at least 20 employees, that offer health insurance as a benefit, to offer coverage to workers who leave or lose their jobs.
Relatively few employees take up their former bosses on this deal, though, because of the high cost of COBRA. While employers often pay two-thirds or more of the cost of health insurance for their employees, in most cases an ex-employee has to pay 100 percent of the cost, plus a 2 percent administrative fee.
But this new law slashes the cost.
As with many tax breaks, there is an income cap. If you are single and your modified Adjusted Gross Income for the year falls between $125,000 and $145,000, at least part of the subsidy will be considered taxable. The same is true if you’re married and your income is between $250,000 and $290,000.
For income above $145,000 for single filers and $290,000 for married taxpayers, you have to report any COBRA subsidy received as taxable income. (Of course, that’s still a lot better than having to pay the full premium yourself.) For most taxpayers, modified Adjusted Gross Income is taxable income before subtracting the value of personal and dependent exemptions, and standard or itemized deductions.
