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Keeping COBRA Benefits A Struggle For Laid-Off Workers in 2010

BEWARE! Insurance companies are using unscrupulous practices to get policyholders off its rolls!

While I understand that these companies need to make a buck to keep afloat, there must be some better way to make more money than to void a policy for just 2 cents!

Take Stan Rosen of Miramar, Miami. He lost his job, his wife was six months’ pregnant and he faced an operation and he had COBRA benefits to help make ends meet.

Then, by mistake he underpaid his November bill by two cents (!!), and his benefits administrator said his policy was being canceled. Rosen and his wife, saw “making ends meet” slip through their fingers.

He quickly paid the two cents (!!), and it got reinstated. But ONLY after he and his dad called about 100 times and got The Miami Herald involved that the company relented and continued coverage.

The Rosens’ case is an extreme example an incident that’s becoming more widespread: Laid-off workers are struggling through a bureaucratic labyrinth to keep health insurance while insurers and former employers have little to no interest in aiding them beyond what is required by federal and state laws.

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act of 1985 is a law signed into effect by President Ronald Reagan that mandates an insurance program that helps employees continue health, disability insurance and postal services even in the event they are out of a job.

Federal coverage with this benefit mandates companies with more than 20 employees to offer their laid-off workers as much as 18 months of health insurance, as long as the worker pays the entire cost of the premium.

Current coverage can easily cost $1,200 a month for a family, and that may be too expensive for most. The Obama administration last year began the American Recovery and Reinvestment Act of 2009 (ARRA) to subsidize 65 percent of COBRA costs for up to nine months, but many still can’t afford it.

What About Coverage for Companies With Less Than 20 Employees?

On the flip side, companies with fewer than 20 employees are covered by a state law, but people who have had to use it, like Robert Dollar of Miami, say it’s even more convoluted than the federal law.

“My COBRA has turned into a hysterical joke,” says Dollar, who pays $712.34 a month just to cover his wife.

Federal law requires large companies to give departing employees a thick COBRA packet stuffed with explanations. But state law makes an exception to small companies, like the one Dollar worked for.

Scores of phone calls and sent faxes later, Dollar’s efforts to contact his former company’s insurer, Neighborhood Health, to get the continuation coverage, was wasted when his former company switched to Aetna. The dismayed Dollar had to go through the whole process again. “It’s a maze of stuff,” he said.

Insurers Say COBRA Is A Liability To Them

According to Gran LeCompte, an executive with MDW Insurance in Coral Gables, Fla., says that for employers and insurers, COBRA is “a major pain in the butt. … There’s a ton of liability.”

A major key problem for insurers is that young and healthy employees who are confident of finding work tend to reject COBRA, while older and sicker and less confident workers will grab it. “Typically those who take coverage cost two to five times (more) in benefits than a normal employee costs,” LeCompte says.

Furthermore, Federal law seeks to keep insurers and employers in line by penalizing them for infractions. LeCompte says that means most big companies outsource the details to a company specializing in COBRA coverage and administration.

Rosen’s insurer is Ceridian, who spotted that Rosen had paid $334.97 for his November bill, rather than the proper amount of $334.99.

Federal law allows a month’s grace period to pay the full bill, but Rosen did not learn about the two-cent problem until he received his next bill, at the end of November, past the grace period that expired Dec. 3, which terminated the Rosens’ coverage.

Joe Brown, spokesman for Ceridian Benefits Services, told The Miami Herald the company was required to follow the letter of the law “or the company would be held liable.” Its legal responsibility was to administer Rosen’s insurance for his former employer, a Miami Beach hotel.

But Jay Rosen kept working at it.. He called the offices of a senator and representative. He called the former employer, and he kept hounding Ceridian reps. “The normal person would have given up long before I did,” he says.

Eventually, the insurer decided to forgive the two cents, and the Rosen policy was reinstated.

COBRA Benefits Eligibility Cut-Off Extended to March 01, 2010

The federal subsidy of 65 percent was slated to end Dec. 31, 2009, but just before the Christmas recess, Congress decided to extend its benefits: Workers laid off before March 1 can qualify for help, and all can get up to 15 months of subsidy.

In the reform packages now before Congress, the House version has a provision that people with COBRA could retain their coverage until the insurance exchanges start.

Those would allow everyone without employer-based coverage to sign up for a plan, regardless of preexisting conditions, with subsidies based on income levels. Such exchanges are not scheduled to start before 2013.

Archie Mathys is a research writer on current events affecting American life. From his home in Reston, he writes interesting but true slices of American life. Currently, he works on reading Kiyosaki, personal finance & the Wall St. news updates. He has a fascination for futurism and enjoys figuring out how things will work out in the future.

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