New subsidy for COBRA will help some of the unemployed remain insured

It's a cruel consequence of being laid off. Just when the paychecks stop, the cost of health insurance surges.

Now, as the ranks of the unemployed multiply, the government is providing unprecedented relief. Final details are being worked out, but those who were laid off since last fall may be eligible for a 65 percent subsidy to pay for COBRA - which lets people extend employer-sponsored health insurance after leaving a job. Here's what you need to know:

Most people who leave their jobs can extend their health insurance through COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985. The law applies to people who were enrolled in group insurance plans at companies with at least 20 people.

The 65 percent subsidy is available to those who lose their jobs between Sept. 1, 2008, and the end of this year.

People have 60 days after being laid off to enroll in COBRA. One plus is that the subsidy gives people who missed the deadline a second chance to sign up. The new election period will end 60 days after people are notified about their eligibility for the subsidy.

What's not yet clear is whether people who took a buyout or early retirement to avoid a layoff will be eligible.

On average, the monthly cost of COBRA is $400 for an individual and $1,000 for a family, according to the Kaiser Family Foundation, a health policy research group in Washington, D.C.

While the subsidy lowers the cost to 35 percent of the premium, that's still more than twice the average of 16 percent people typically pay while employed, according to the Kaiser Foundation.

If you paid full price for COBRA this month because you haven't yet been notified of the subsidy, you're entitled to a reimbursement. The 65 percent subsidy became available Feb. 17.

There are a few strings attached if you earned between $125,000 and $145,000 for the year.

People are eligible to elect COBRA for up to 18 months. But the 65 percent subsidy lasts only for half as long.

Some plan administrators may require a separate application for the subsidy. You should then start seeing reduced monthly bills. It's important to note you can't sign up for the subsidy if you can get coverage under a family member's plan.

If COBRA is still too pricey, check what public programs are available in your state. Browse the state health department's website; it should have information about eligibility and enrollment on aid programs.

Candice Choi writes for the Associated Press.