Here is our update...

Backgrounder...

Thanks to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), companies with 20 people or more must offer employees who are being laid off the opportunity to extend their health coverage at group rates. The continued coverage lasts a minimum of 18 months and sometimes longer.

That's the good news. The bad news is that under normal circumstances you are the one who has to pay the premiums-100% of them plus an administrative fee. According to the Kaiser Family Foundation, in 2008 the average premium was $397 per month for an individual and $1,081 for a family. If you've been accustomed to your employer paying all or most of your premiums, this may come as a bit of a shock.

However, under the 2009 stimulus package, people who sign up for COBRA will be required to pay only 35% of the premium! The federal government will reimburse employers (or health plans) for the other 65% for up to nine months.

To qualify, you had to involuntarily leave your job between September 1, 2008 and December 31, 2009. This nice break phases out between $125,000 and $145,000 in adjusted gross income for singles and between $250,000 to $290,000 for married couples filing jointly.

The reduction in the cost of your premium can also cover your spouse, partner or dependents who were in your health plan. However, you cannot get the subsidy if you are eligible for another group plan, such as your spouse's, or Medicare.

$TIP: If you lost your job after September 1, 2008 and declined COBRA, you now get another chance to enroll. Check with your former employer.

With or without the stimulus subsidy, COBRA premiums are almost always less than you would pay if you took out your own individual health insurance policy. There are two possible exceptions to this: If your spouse has coverage, it's probably cheaper to purchase family coverage under her plan. And if you're very young and very healthy, your own plan might be cheaper than your employer-provided plan.

$TIP: To check on what your state offers, go to the National Association of Health Underwriters Web site: www.nahu.org/consumer/healthcare.

Caution: You must apply within 60 days after being notified by your employer of your rights under COBRA, and you have 45 days after you elect COBRA coverage to make the first premium payment.