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Access to COBRA healthcare subsidy may expand

Under California bill, people laid off from businesses with fewer than 20 workers would qualify for the temporary federal subsidy. Health insurers would have to notify previously insured employees.

March 31, 2009|Cyndia Zwahlen

Workers laid off by California's smallest businesses have a shot at subsidized healthcare under a bill moving quickly through the Legislature.

As part of February's stimulus package, some laid-off employees can get the government to temporarily cover 65% of the cost of continuing their health insurance under the federal COBRA law, which allows workers to keep their healthcare coverage but requires them to pay the premiums.

California's AB 23 would extend the subsidy to those who worked for companies smaller than the COBRA minimum of 20 employees. The bill also would require health insurers to send notices about the subsidy to previously insured employees laid off from businesses with two to 19 workers.

The subsidy provided under the federal stimulus bill would last up to nine months. And it applies only to previously insured people who lose their jobs because of involuntary terminations from Sept. 1, 2008, through the end of 2009. There are also income restrictions.

Despite the limitations, the subsidy is expected to be a boon to laid-off workers, said Nathan Fletcher (R-San Diego), who co-wrote the bill with Dave Jones (D-Sacramento).

"People are really hurting," said Fletcher, who is also vice chairman of the Assembly health committee.

The deadline to send notices to people eligible for the subsidy is April 18. But first, the state would have to pass the bipartisan measure amending current law governing the Cal-COBRA program. Cal-COBRA allows laid-off employees at very small businesses to continue their group health insurance as long as they pay the full premium.

"More than 116,000 Californians lost their jobs in February, and with that, many of them lost their health insurance," Insurance Commissioner Steve Poizner said in a statement last week supporting the bill.

Laid-off employees of businesses with 20 or more workers don't need the state law changed to access the subsidy: Businesses of that size fall under the federal COBRA program. Those businesses will have to handle the notification process themselves, track down laid-off employees and front the 65% subsidy to their insurance companies until they are repaid through quarterly payroll tax credits.

"This whole notification thing -- putting out the multiple forms and having to select the right one to send to employees -- for a small business, that is going to drive them crazy," said Scott Hauge, owner of CAL Insurance & Associates in San Francisco and president of the Small Business California trade group.

The federal stimulus bill also gives eligible workers a second chance to sign up for state and federal COBRA coverage. Those people may have initially rejected post-layoff coverage or signed up but later stopped their participation.

The Assembly bill was sponsored by the California Department of Insurance, which said a change in state law was needed for people eligible for Cal-COBRA to qualify for the federal subsidy. The bill was introduced last week, passed the Assembly healthcare committee and is headed for the appropriations committee.

Workers aren't eligible for the subsidy if they reach the end of their maximum COBRA coverage period or if they become eligible for Medicare or another group health plan at a new job or through their spouse's employer, for example.

More information for employers and employees, including a free webcast discussing the provisions for employers who have to comply with the federal COBRA, is available at the U.S. Department of Labor's website, www.dol.gov.

Small-business confidence is up

Economic confidence among owners of the nation's smallest businesses was up more in March than in any of the previous eight months, according to the Discover Small Business Watch.

The monthly index rose 6.3 points to 78.2 this month from 71.9 in February as fewer firms said the economy was getting worse and more saw conditions for their own businesses improving.

The national random survey of 1,000 small-business owners with fewer than five employees is done by Rasmussen Reports and paid for by Discover Financial Services. The base value was established at 100 based on the Watch's first surveys in August 2006. The margin of error is 3.2 percentage points with a 95% confidence in the results.

In March, the number of small-business owners who said the economy was getting worse dropped to 60% from 69% in February and 79% in June. Nine out of 10 owners still rated the economy as fair or poor, unchanged from February. The portion who saw the economy getting better rose to 16% in March from 12% in February.

Workers' comp rate hike possible

California businesses may face a double-digit hike in the price of their workers' compensation insurance premiums this summer.

After several years of declining, flat or modestly higher premiums, a 24.4% increase was recommended recently by the board of governors of the state's Workers' Compensation Insurance Rating Bureau Actuarial Committee.

It's now up to Poizner, a Republican who wants to be the next governor. Insurance companies can set their own rates but are supposed to be guided by the recommendations.

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smallbiz@latimes.com

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