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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Thursday, September 17, 2009

COBRA Subsidy Will Expire On December 31, 2009

COBRA Subsidy via The American Recovery and Reinvestment Act of 2009 (ARRA)If you've ever been laid off from a job, then you've probably heard of COBRA. COBRA is short for the Consolidated Omnibus Budget Reconciliation Act of 1985, a law that let's a recently unemployed worker extend the group health plan their employer provided for them for up to nine months.

COBRA was a good idea, but it practice it really doesn't help much. That's because the cost of using COBRA is just too high. I remember being asked to pay more than $400 to continue on my former employer's group plan back in 1999. I can only imagine what I'd be asked to pay if I wanted to use COBRA today.

The American Recovery and Reinvestment Act of 2009, or ARRA, which was signed into law by president Obama back in February of this year, includes help for those who want to use COBRA, in the form of a 65% premium reduction. 65% is a big deal. It can reduce a $400 COBRA premium down to a far more affordable $140.

Two important things to note about this subsidy:

  • Help comes in the form of a tax credit, so you'll still need to have enough cash available to pay for the full COBRA premium amount if and when you sign up for the program.

  • The subsidy ends on December 31, 2009.

For more info on the COBRA subsidy, visit this webpage.

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