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Vitale/Buono Bill To Extend COBRA Benefits To More Unemployed Clears Senate Commerce Committee

Measure Would Offer Extended Health Benefits to Residents Left Jobless Following Business Closure, Make More New Jerseyans Eligible for Federal Subsidies

TRENTON – The Senate Commerce Committee today unanimously approved legislation sponsored by Senator Joseph Vitale and Senate Majority Leader Barbara Buono, both D-Middlesex, that would offer extended health benefits to residents left jobless as a result of their place of employment closing.

The bill (S-956) would allow employees who are laid off due to a workplace closure to continue receiving employer-sponsored health benefits for up to 18 months, under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Those individuals – required to purchase the coverage – could then take advantage of reduced insurance premiums, made possible through subsidies provided under the federal economic stimulus act and extended by Congress.

“The federal government is essentially offering reduced health care premiums to residents who have become unemployed during the recession. We must ensure that all eligible New Jerseyans are able to take advantage of this benefit,” said Senator Vitale. “With this bill, we will close a loophole in state law that has prevented a segment of the population from obtaining continued health insurance after losing their jobs and give them access to more affordable coverage.”

Under current state law, COBRA benefits are available only to unemployed residents whose former place of employment continues to offer a group health plan. This effectively blocks unemployed residents whose employer has gone out of business from receiving continuation benefits, also making them ineligible for reduced premiums first provided under the American Recovery and Reinvestment Act of 2009 (ARRA). Federal law allows eligible recipients to pay just 35 percent of their COBRA premiums; the other 65 percent is reimbursed to the provider through a tax credit.

“New Jersey cannot afford to pass up an offer from the federal government to pay 65 percent of health insurance premiums for unemployed residents,” said Majority Leader Buono. “This legislation will extend an important safety-net program to more out-of-work New Jerseyans, allowing some who were forced to drop insurance coverage when they lost their jobs to get back on the rolls. Given the number of uninsured who are just one hospital stay away from financial ruin, passage of this measure is critical.”

The federal subsidy expires May 31, 2010, but has been extended multiple times and will likely be extended again. This measure would remain effective only as long as the federal premium assistance for continuation coverage is provided. It would apply retroactively, to residents whose employer ceased operations on or after October 1, 2009.

The bill now heads to the full Senate for consideration.

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