“If I am on COBRA from my last job, and I become eligible for health insurance from my new employer at a much higher cost, can I stay on COBRA?”

Question: Six months ago I was let go from my job, and I have remained on my former employer’s health plan through the federal COBRA law.

I am now taking a new job, and my new employer has offered me participation on its health insurance plan. However, the health insurance premiums on my new employer’s health plan are almost double what I am paying for coverage on my former employer’s health insurance plan under COBRA.

Can I opt NOT to join my new employer’s health plan, and instead continue to be covered under my former employer’s plan for the next 12 months through COBRA?

Waukee, Iowa

Answer:  Sorry, P.D., generally, the law says, “No.”

First, the federal COBRA law provides that, once you become eligible for health care coverage on a new employer’s health care plan, you then become ineligible to continue to be covered under your former employer’s plan.

There is an important exception you should be aware of: If one or more members of your family has a pre-existing medical problem that IS covered under the “old” health care plan, but would NOT be covered under the “new” plan because it is a “pre-existing condition,” then you can remain on the “old” plan.

Second, under the American Recovery and Reinvestment Act of 2009, people who were laid off between September 30, 2008 and December 31, 2009 receive a “subsidy” of 65% of their COBRA health insurance premiums, paid by the Federal Government. This “subsidy” is probably why your COBRA health premium on your “old” employer’s plan is so much less expensive than it would be on the “new” employer’s plan.

If you remain on your “old” employer’s health plan after you become eligible under your “new” employer’s health plan, and in this way wrongfully receive the government-provided continued health care subsidy, the Internal Revenue Service can fine you up to 110% of the “subsidy” you improperly received.

The U.S. Department of Labor has a very good website that provides answers to many COBRA-related questions. It is www.dol.gov/COBRA.

Sorry if it wasn’t the news you wanted to hear. Nonetheless, I hope this has been helpful.

My Best to You,
Al Sklover

© 2010 Alan L. Sklover, All Rights Reserved.

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