What Obama's Economic Stimulus Plan Means for Employers

February 6, 2009

Excerpted from Benefits and Compensation Law Alert

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Update from HR News : More details on COBRA continuation subsidy in stimulus package

Sandwiched in with all the infrastructure development and green energy provisions of President Barack Obama and the Democrat's economic stimulus plan are several provisions that affect employee benefits, particularly health benefits.

The stimulus bill is called the American Recovery and Reinvestment Act of 2009. Its goals are to create jobs, restore economic growth, and strengthen America’s middle class through: (1) modernizing infrastructure; (2) enhancing energy independence; (3) expanding educational opportunities; (4) preserving and improving affordable health care; (5) providing tax relief; and (6) protecting those in greatest need, according to a statement from the House Appropriations Committee.

Keep up with the latest changes for employers regarding COBRA and other benefits with the Benefits and Compensation Law Alert and Benefits and Compensation Law for Non-Profits.

Following is a quick summary of benefits-related provisions, based on the Appropriations Committee statement and information on the web site of the House Ways and Means Committee:

COBRA-related measures
A key part of the recovery package involves helping those unemployed in the recession keep their health insurance. The Congressional Budget Office estimates that this package would help nearly 8.5 million people keep coverage for themselves and their families.

Under COBRA a person generally may retain health coverage through a previous employer’s health plan for up to 18 months by paying 102 percent of the cost of that coverage (the 2 percent goes toward administrative costs). There are three main prongs of the recovery package’s provisions on health coverage continuation.

First, the package provides for a 65 percent subsidy for COBRA premiums, lasting up to 12 months, so that people who have been involuntarily terminated from their jobs are better able to maintain coverage for themselves and their families. To be eligible, a worker must be involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidy ends upon offer of any new employer-sponsored coverage.

Second, the proposal also creates new options for states to extend health care through Medicaid to unemployed workers not eligible for COBRA. Separate eligibility requirements and time-of-termination rules apply. These first two health-coverage proposals would cost an estimated $39 billion, the Appropriation Committee summary states.

Third, separate from the short-term subsidy for involuntarily terminated workers, COBRA-eligible workers who are 55 and older, or have worked for an employer for 10 or more years, would be able to retain COBRA coverage, at their own expense and without subsidy, until they become Medicare eligible at age 65 or secure coverage through a subsequent employer.

Audio Conference: Effective Immediately: How the Stimulus Package Changes COBRA

Prelude to universal care?
Other health-related proposals are geared toward cost containment and include the following:

Health information technology: $20 billion to jump-start efforts to computerize health records, with the goal of cutting costs and reducing medical errors.

Prevention and wellness fund: $3 billion to fight preventable chronic diseases, the leading cause of deaths in the U.S., and infectious diseases. Preventing disease rather than treating illnesses is the most effective way to reduce health care costs. This includes hospital infection prevention, Preventive Health and Health Services Block Grants for state and local public health departments, immunization programs, and evidence-based disease prevention.

Health care effectiveness research: $1.1 billion for programs to compare the effectiveness of different medical treatments funded by Medicare, Medicaid, and SCHIP, a federally funded health insurance program for children.

Community health centers: $1.5 billion, including $500 million to increase the number of uninsured Americans who receive quality health care and $1 billion to renovate clinics and improve health information technology.

Training primary care providers: $600 million to address shortages and prepare our country for universal health care, the Appropriation Committee report says, by training primary health care providers including doctors, dentists, and nurses as well as helping pay medical school expenses for students who agree to practice in underserved communities through the National Health Service Corps.

Indian health service facilities: $550 million to modernize aging hospitals and health clinics and make health care technology upgrades to improve healthcare for underserved rural populations.

HR Executive Special Report: How to Evaluate & Manage Employee Health Plans

Unemployment insurance benefits
The recovery proposal would take the following steps on unemployment benefits:

Benefits extension: $27 billion to continue the current extended unemployment benefits program -- which provides up to 33 weeks of extended benefits -- through December 31, 2009, given rising unemployment.

Increased benefits: $9 billion to increase the current average unemployment insurance benefit from roughly $300 per week, paid out of state trust funds, by $25 per week using federal funds, through December 2009. There are currently 5.3 million workers receiving regular unemployment insurance benefits and an additional 1.9 million receiving extended benefits.

Unemployment insurance modernization: Provides funds to states though a "Reed Act" distribution, tied to states’ meeting specific reforms to increase unemployment insurance coverage for low-wage, part-time, and other jobless workers.

HR Hero Free White Papers: Downsizing: Getting It Right from Termination to Engaging the Survivors and 5 Alternatives to a RIF

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Copyright 2009 M. Lee Smith Publishers LLC. BENEFITS AND COMPENSATION LAW ALERT . Benefits and Compensation Law Alert is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that neither the author(s) nor its publisher is engaged in rendering legal, accounting, or other professional services through its pages. If legal advice or other expert assistance is required, the services of a competent professional should be sought. (From a Declaration of Principles jointly adopted by a committee of the American Bar Association and a committee of Publishers and Associations.)

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