Florida Health Insurance Topic:
"COBRA & The Unemployed"

COBRA CAN HELP UNEMPLOYED

May 15, 2009 -- Virginians who have lost their jobs in a wave of layoffs since September have a new lifeline for health insurance, but only if their former employers still have health plans and know about the obligation to offer continuing coverage.

The federal stimulus package adopted in February will pay 65 percent of healthinsurance premiums for laid-off workers for up to nine months, while a newly adopted state law will offer the same opportunity for people cut by small businesses since the beginning of September through the end of this year.

However, the federal subsidy applies only to businesses that still offer operating group health plans at a time when corporate bankruptcies, plant closures and liquidations have prompted some big employers to drop health insurance completely.

In the Richmond area, for example, more than 1,900 employees of Circuit City Stores Inc. lost their jobs and any chance of continued health coverage when the retailer went bankrupt and closed all its operations. LandAmerica Financial Group is still providing health coverage for its nearly 300 remaining employees in the area, but eventually will cease health-plan coverage as it sells off its assets in bankruptcy.

"The intent is good, but there's a disconnect," said George T. Drumwright Jr., a deputy county manager in Henrico County who helped establish a regional center for laid-off workers. "If you're bankrupt, or going to go bankrupt, you're only keeping that until the last person turns the light out."

The problem already has begun to show, first in local social-services departments and now at the Capital Region Employment Transition Center at Innsbrook in western Henrico, Drumwright said. "We're hearing people having difficulty with it. It's just beginning to bubble up to the surface."

At the same time, Virginia insurance carriers are taking the lead in letting an estimated 168,000 small businesses know about a new state law that requires them to offer continuing health coverage, using the same 65 percent stimulus subsidy, to workers laid off by companies with fewer than 20 employees.

The law, adopted by the General Assembly at its veto session last month, does not have a mechanism to enforce the notice requirement, so insurance regulators are working with carriers and health plans to notify affected businesses. The Virginia Employment Commission plans to take out advertisements as a low-cost way to get out the word.

"The real deal here is we have a lot of small business out there who know nothing about this at all," said S. Owen Hunt, associate general counsel at Anthem Blue Cross Blue Shield, which is mailing notices to about 24,000 small businesses with group health accounts. "Their only source of information is us. . . . We're going to go out and give them information about it. That's just good business."

The vehicle for the insurance subsidy is COBRA, a long-standing federal law that allows employees who lose their jobs an opportunity to continue coverage under group health plans at their own expense. The cost can be enormous, more than $1,200 a month in some instances, which prompts many of the unemployed to look elsewhere for help.

COBRA coverage also is no guarantee for employees of companies in the throes of bankruptcy, such as Qimonda North America Corp., which cut 2,000 jobs when it closed two semiconductor chip factories in eastern Henrico. The company is maintaining its group health plan for a skeleton staff, so COBRA coverage is still an option for former workers, such as Jack and Sandra Hicks.

The New Kent County couple lost their jobs at the two factories in mid-March. "They said COBRA was there as long as the company didn't go completely bankrupt," said Sandra Hicks, who was a materials buyer for one of the Qimonda factories.

Continuing their coverage would have cost the couple more than $800 a month, without any subsidy, so they took out an individual policy for $558 a month.

"We're both over 50. If something happens to us, it could bankrupt us," she said. "We have to have insurance."

The stimulus subsidy gives the Hickses a second chance at continuing coverage while paying 35 percent of the cost, but they have an even better option with the Health Coverage Tax Credit. The credit is linked to the federal Trade Adjustment Assistance program, which provides enhanced benefits for workers who lost their jobs because the work was outsourced to overseas operations or affected by increased imports.

Qimonda applied for coverage for workers laid off in Virginia and North Carolina. The program offers to pay 80 percent of health-insurance premiums for eligible workers for up to two years. Moreover, coverage would continue even if the company disappears because Anthem is the insurer of last resort for the program, which the VEC is administering for the federal government. The Department of Labor said last week that it is distributing nearly $6.2 million under the program in Virginia in the federal fiscal year that ends Sept. 30.

"Qimonda has been actively working with both the Virginia and North Carolina unemployment offices, as well as our external health-care providers, to ensure individuals understand these benefits," said Don O'Grady, vice president of human resources.

Advocates for the unemployed are intensifying their efforts to let laid-off workers know their options under COBRA and, for small businesses, Virginia's so-called "mini-COBRA" program.

"It's huge -- it's really important for people," said Jill A. Hanken, staff attorney at the Virginia Poverty Law Center and a member of a state working group on health-care coverage for people in the economic crisis.

Hanken and other advocates know the COBRA coverage isn't perfect, even with a hefty premium subsidy. It depends on a company with a viable health plan, and thousands of the newly unemployed worked for companies in deep, sometimes irreversible trouble.

"It's a narrow, targeted subsidy for a subset of those folks who are losing their jobs," she said. But the gaps in eligibility worry Cheryl Fish-Parcham, deputy director for health policy at Families USA. "The lack of help for people whose companies have gone completely out of business is an enormous problem," she said.

The biggest example here is Circuit City, a Henrico-based retailer that cut off health coverage for 34,000 employees nationwide after it was unable to emerge from Chapter 11 bankruptcy.

LandAmerica will close its headquarters by the end of the year and lay off the 291 employees remaining from a work force that numbered 930 at the beginning of last year. The company sold its two largest subsidiaries in December to a Florida-based rival, Fidelity National Financial Inc., which then laid off 1,500 of the 5,500 people the companies employed nationwide. Fidelity will not say how many people were laid off in the Richmond area or return calls for information about continued group-insurance coverage under COBRA.

What's left of LandAmerica is still maintaining the health plan and offering the chance for continued coverage, said spokeswoman Cheryl Gentry. "Whoever's eligible and signs up qualifies for the subsidy."

But Gentry added, "At some point, the plan will likely go away. When the plan goes away, the COBRA will go away, too."

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