Jennifer Flowers

Over the past year, Tom Rutledge has watched with growing concern as business at Emanon Manufacturing Technology slowed from its best-ever performance last year to a 40 percent drop this year.

The company’s owner was forced to lay off three employees last month, and Mr. Rutledge, a machinist and programmer at Emanon, which manufactures machine parts for other businesses, knows that no jobs are safe in this economic climate.

Staff Photo by Angela Lewis Gordon Dickson works at Emanon on Wednesday morning. Three employees were recently laid off from the company and were eligible for reduced rate Cobra insurance.

That’s why it was a relief for Mr. Rutledge, who is 50 and has diabetes, to learn that the economic stimulus bill provides money to support health insurance for laid-off employees of small businesses — those with fewer than 20 employees, like Emanon.

“It’s helping my stress level,” he said. “I was really worried about losing my insurance. I’m on certain medicines and that would be really hard.”

Many business owners are aware that the economic stimulus bill contains safety net provisions for the recently unemployed. The bill includes a 65 percent premium reduction in federal COBRA benefits, which provide up to 18 months of health care coverage to laid-off employees of businesses with more than 20 workers.

Fewer realize that the stimulus also helps employees at small businesses, which typically aren’t eligible for COBRA, said Joanne Denise, employee benefit specialist with Strategic Employee Benefit Services in Chattanooga.

“It’s just one sentence in the regulations,” Ms. Denise said. “A lot of people skip over it because they hear the word ‘COBRA’ and they make the assumption ‘We’re too little.’”

The stimulus bill’s premium reduction also applies to state continuation coverage, known as “mini-COBRA” policies in some states, which provides three months of continued health care coverage for those who have lost jobs at small businesses.

As with COBRA coverage, the cost of state continuation coverage is so high that many employees choose not to elect it. Laid-off employees could pay up to 102 percent of the cost of their typical insurance premium, which includes the portion normally paid by their employer and sometimes a 2 percent administrative fee.

A 65 percent reduction in that cost is a huge help to employees facing a budget supported only by an unemployment check, said Rick Jenkins, president of Emanon. One of the employees he had to let go last month already has received discounted state continuation coverage benefits, he said.

Without the discount, the employee’s monthly premium for his family coverage, under the state continuation plan, would have been $980 a month.

“Someone that has a full-time job can’t even pay that,” Mr. Jenkins said.

But with the discount, the employee’s monthly premium obligation is a more manageable $343.

The premium reductions apply for nine months, or whenever an employee’s maximum period of continuation coverage ends, according to the U.S. Department of Labor. The period is three months in Tennessee and Georgia for state continuation coverage, according to the National Association of Health Underwriters.

The stimulus bill specifies that the reduction on federal COBRA premiums will be provided retroactively to employees who have been laid off since September 2008, through the end of 2009. This gives those employees who may have initially declined the costly coverage a second chance to apply.

But the bill does not extend that second chance to employees of small businesses. Only those who are still within their coverage period as of March 1, or those who are laid off since the stimulus bill became effective on Feb. 17 are eligible for the subsidized premiums.

Last week, New York Gov. David A. Paterson introduced legislation to provide the extended election period to those eligible for state continuation coverage, “mini-COBRA” in New York, according to the Buffalo News.

Ms. Denise with Strategic Employee Benefit Services hopes a similar change will come in Tennessee, as well as an extension of the state continuation coverage period.

“The economy isn’t going to get that much better in three months,” she said. “They’re going to realize after three months, these people are left with nothing.”