Proposed COBRA Subsidy Extension Cut by One Month

House Democratic leaders Wednesday night, May 26, agreed to pare back by one month an extension of federal COBRA health insurance premium subsidies to the unemployed as part of a broader effort to win support for the broader tax bill to which the COBRA provisions are attached.

With the change, the 15-month, 65 percent COBRA subsidy would be provided to employees who are involuntarily terminated through November 30.

Under the original bill, H.R. 4213, the subsidy would have been extended to employees laid off through December 31. The bill’s backers made the change in hopes of winning over fiscally conservative Democrats concerned about the bill’s overall cost.

Without an extension, employees laid off beginning June 1 would not be eligible for the subsidy. If the bill passes, observers say it is likely that lawmakers later in the year would extend the premium subsidy through at least December 31.

“Although the subsidy was pared back, I don’t think Congress would let it expire just prior to the holiday season,” said Frank McArdle, a principal in the Washington office of Hewitt Associates Inc.

The measure, which also contains provisions to give employers more time to fund their pension obligations, could be considered by the House on Thursday. The Senate has not acted on the measure.