Stimulus will help laid-off workers with COBRA costs

— -- If you're out of work, someone — a relative, colleague or financial adviser — has probably emphasized the importance of continuing your health insurance.

Given the cost, though, that might only be decent advice if you own a trust fund that hasn't been torpedoed by the bear market.

The economic stimulus package signed into law last month seeks to address the high costs by subsidizing COBRA premiums for unemployed workers. Under the federal Consolidated Omnibus Budget Reconciliation Act, or COBRA, laid-off workers can continue their former employer's health coverage for up to 18 months, but only if they pay the entire premium, plus a 2% administrative fee. Average COBRA premiums exceed $400 a month for individuals, and more than $1,000 a month for families.

The stimulus package will subsidize 65% of COBRA premiums for employees who were laid off between Sept. 1 and the end of this year. If you delayed signing up for COBRA coverage when you lost your job, you have 60 days to re-enroll after you receive a notice from your employer.

The subsidy takes effect March 1, but employers have until April 17 to notify eligible former employees. Laid-off employees who have already signed up for COBRA may have to pay full premiums in March and April, says Kathryn Bakich, senior vice president and head of the health care compliance practice at Segal Co. Those individuals will receive a credit or rebate for their March and April overpayments, she says. However, they won't be reimbursed for premiums paid before March.

Here are some other things you need to know about the COBRA subsidy:

•Employees who retired or left voluntarily are ineligible for the subsidy. If your employer determines that you're ineligible and you disagree, you can file an appeal with the Department of Labor. The department is in the process of developing an application for appeals. You can find more information at www.dol.gov/cobra.

•You're ineligible for the subsidy if you have access to other group insurance coverage,such as a spouse's insurance plan or Medicare.