Will the Stimulus' "Second Chance" COBRA Election Period Cover Those Who Elected But Didn't Pay?

March 11, 2009 3:37 PM

The American Recovery & Reinvestment Act helps unemployed people with their COBRA payments in two ways: it subsidizes 65% of their payments, and because this lower price makes it affordable for many who couldn't before, it allows people who didn't elect for COBRA the first time a second chance to elect for coverage. I was laid off on October 24, and I did elect for coverage on January 28. But I haven't paid yet. The grace period for payment ends in a few days, on Saturday — it has to either be paid online or postmarked by then. If I were to not pay, would I be given the same second chance as those who didn't elect the first time around — the difference being that I would have elected, but not paid? It's a substantial financial difference for me. A little bit more inside.

The matter is slightly complicated in that the administrator of my ex-employer's COBRA program, ADP, hasn't yet changed its balances to reflect the government's 65% subsidy. They require I go retroactively back to when I lost my insurance. As such, for four months of health insurance (12/1-3/31), I face a balance due of about $2,000 — instead of the $700 due that a 65% subsidy would have left. Once things are set up — which the customer service representative I spoke to on the phone implied might be as far off as mid-April — any excess monies will either become a credit towards future payments, or will be paid back to me.

So, I'm faced with two choices at this moment.

I can pay the amount due of about $2,000. At the moment, this reflects four months' COBRA payment. Once the subsidy clears, I'll presumably either be refunded the difference or be given, if I'm doing the math right, about seven months' prepayment credit on my account. Personally, I anticipate that they would choose to make it a "credit," so that the money stays in their coffers (never expect a company of any sort to willingly part with money currently in its coffers during a severe economic recession), and so this would mean $2,000 out of my pocket and not returning to it any time soon. It's something I'm fortunately capable at the moment of very reluctantly doing (thank God), but it's very much not an optimal situation and might cause problems down the road, depending on length of unemployment. In this sort of situation and economy, I'd much rather hold on to ever shekel I possibly can.

Or, I could not pay the amount due. This would be the preferred option if I can be near-certain that I'll be eligible for this "second chance" program. I've confirmed that those people who start COBRA insurance under this "second chance" program will not have to worry about breaks in coverage making them vulnerable for pre-existing condition clauses at their next employer (knock on wood), so that's not a worry. And I only had minor medical expenses these past few months. What alarms me about this choice is should I not be eligible for the "second chance" program — because of that difference, where I did elect but didn't pay — then not paying by this Saturday will essentially mean I forfeit my chance to be covered under COBRA, which not only leaves me uninsured, it also leaves me vulnerable to that awful pre-existing conditions clause which would let my next medical insurer exclude anything for which I had been taking prescriptions, etc. for up to ... I believe for up to a year. At least six months.

Call ADP, you suggest? Already done. Call my Congresswoman's office, you suggest? Already done. Since this evidently was first given to insurance companies on March 1, neither they nor the Department of Labor (whom a phone worker at my Congresswoman's office followed up with) seem to be able to give me a straight answer yet, certainly not before my due date.

I would rather take a bad financial hit now than risk the loss of insurance coverage and exposure to the pre-existing conditions clause, which I think would, simply playing the numbers, offer greater financial liability over the course of that period of exclusion of pre-existing conditions.

I figured I would write this up as an Ask Mefi question on the off-chance that one of the farflung outreaches of the hivemind might have the expertise to wisely advise on this case, enough so that I could make a more educated decision. (The people I spoke with at ADP and at my Congresswoman's office were certainly nice, but I don't believe they were high-level experts, either.) I'm not sure it's likely, but it's worth a Hail Mary play.

Thanks ...

posted by WCityMike to grab bag (3 comments total)

get a lawyer! free consultations from lots. even an hour or two lookin' at this might be cheaper than yer fee.
posted by By The Grace of God at 4:42 PM on March 11

Unfortunately for you, the 65% subsidy is not retroactive. From the Department of Labor's "Fact Sheet: COBRA Premium Reduction": There is no premium reduction for premiums paid for periods of coverage prior to February 17, 2009.

In fact, this section of the law begins: In the case of any premium for a period of coverage beginning on or after the date of the enactment of this Act for COBRA continuation coverage... (emphasis added)

Section 3001(a)(4)(A) -- see p. 3 in the second linked document -- says:
"...in the case of an individual who does not have an election of COBRA continuation coverage in effect on the date of the enactment of this Act but who would be an assistance eligible individual if such election were so in effect, such individual may elect the COBRA continuation coverage under the COBRA continuation coverage provisions containing such sections during the period beginning on the date of the enactment of this Act and ending 60 days after the date on which the notification required under paragraph (7)(C) is provided to such individual." (Emphasis added)

Your situation is that you already have elected to continue coverage. If you do not pay the required premium within the time period set by law, you will lose the right to your coverage. The paragraph above allows a one-time exception for eligible people who did not have coverage in effect on the date of the enactment. You had elected but not paid. Was your coverage "in effect on the date of the enactment" if it is canceled for nonpayment? I don't think so. Your plan would not pay a claim for services on the date of enactment, so it seems nonpayment would make your coverage not in effect on the date of enactment. But if I were you, and could not find a clear answer in the law before your premium grace period has passed, I would not take a chance on interpretation of eligibility. I'd pay the premium.
posted by Snerd at 5:53 PM on March 11

I concur with Snerd, the ARRA is clear on this point.
posted by Falconetti at 7:12 PM on March 11