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Just laid off? Go for COBRA

Posted by Cheryl Costa  March 5, 2009 10:06 AM

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The new stimulus law contains several great breaks for taxpayers. One in particular really helps those who have recently lost their jobs and are wondering how they are going to afford health insurance. Previously in this blog, we have written about the importance of continuing health care coverage when you lose your job. In most instances, the best option is to continue health coverage under the Consolidated Budget Reconciliation Act of 1985 (COBRA). Now, the COBRA option is even more attractive.

Starting March 1, 2009, anyone who loses their job between August 31, 2008 and December 31, 2009 can elect coverage under COBRA and 65% of their premium will be paid by the government for up to nine months. That's a huge savings considering the cost of coverage for a family can be $1,000 per month or more. For example, without this new break, a family would be responsible for paying the full monthly COBRA premium. Now, the family would pay only 35 percent or $350 per month. Over nine months, that is a total savings of almost $6,000.

To be eligible for the subsidy, you must have been "involuntarily terminated". And, if you left your job before February 17, 2009 and you declined coverage, you must be given a 60 day window to elect coverage. Be on the lookout for a notice from your previous employer advising you of the opportunity to re-elect coverage.

It is important to note that there is no income limit for taking advantage of this subsidy. However, if you do take advantage of this option, the amount of the subsidy will be considered taxable income if your 2009 adjusted gross income (AGI) exceeds $125,000 for single taxpayers and $250,000 for married couples filing jointly.

Have more questions about the COBRA changes? Chat with Gerald McDonough, general counsel for the Mass. Department of Labor, Monday, March 9, at 11 a.m.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit www.morganstanleyfa.com/ringer
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