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Important 2010 changes to COBRA The American Recovery and Reinvestment Act (ARRA) was signed by President Obama on February 17, 2009 with an extension of the legislation passing on December 21, 2009 , again on March 2, 2010 , and a final time on April 16, 2010. On July 6, 2010 it was announced that the Subsidy had been discontinued The original legislation allowed for COBRA premiums to be subsidized for employees that are/were laid off between September 1, 2008 and May 31, 2010. The subsidy was 65% and allowed for up to fifteen months or the end of COBRA eligibility, whichever came first. These are a few of the key points:
This is merely an interpretation of the information currently available and is subject to change. As further administrative details become available, we will update this posting. If you have other questions or concerns, please contact us at subsidy@cobramanagement.com
Department of Labor website link for more detailed information
Internal Revenue Service Employer COBRA information
Update: November 23, 2010 We are encountering situations where COBRA participants continue to take advantage of the subsidy when they no longer qualify (spouse or primary qualified beneficiary became eligible for group coverage or Medicare). CMS will remove the subsidy at the earliest opportunity (usually the month for which premiums are not yet paid) and will notify both the participant and the affected employer of the change in rates. As you may recall, the DOL holds employers harmless for subsidies that were incorrectly taken. COBRA participants are responsible for correctly reporting receipt of the subsidy on their federal tax returns for the appropriate calendar year. Penalties of 110% will apply to subsidy amounts that were taken in error. On July 6, 2010, Assistant Secretary of Labor Phyllis Borzoi released a statement that “due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.”
Update: June 1, 2010 Congress failed to approve a qualifying event date extension for the ARRA subsidy before the Memorial Day recess. As a result, any individual who was involuntarily terminated from employment on or after June 1, 2010 is NOT eligible for the COBRA premium reduction under ARRA at this time. To further clarify, this means that the COBRA premium reduction will not apply to COBRA effective dates of 6/2/2010 forward.
Update: April 16, 2010 Congress has once again passed legislation that will extend the COBRA premium reduction under ARRA to individuals who were involuntarily terminated from employment from April 1, 2010 through May 31, 2010. No further information has been released at this time. We will notify you as soon as additional guidance has been issued on new notification requirements. The Temporary Extension Act of 2010 was signed into law on March 2, 2010, extending the premium reduction under ARRA to individuals who were involuntarily terminated from employment March 1, 2010 through March 31, 2010. Assistance Eligible Individuals (AEIs) will continue to receive a 65% subsidy for a maximum of 15 months, unless they become eligible for other group coverage or Medicare, or the maximum COBRA period ends first. New rules apply for individuals who lost coverage due to a reduction in hours between 9-1-08 and 3-31-10 then were involuntarily terminated from employment on or after 3-2-10 through 3-31-10. We are waiting for clarification from the Department of Labor, at which time we will be posting more information regarding this class of qualified beneficiaries.
Legislation extending the ARRA COBRA premium subsidy program has passed both the House and the Senate and was signed by President Obama on December 21, 2009. What does this mean for COBRA participants who qualify as “Assistance Eligible Individuals?” Extended eligibility period to 2/28/2010 The subsidy program now covers individuals becoming eligible for COBRA due to involuntary employment termination on or before Feb. 28, 2010. It is unclear whether an individual who is involuntarily terminated in February, 2010 and becomes eligible for COBRA continuation coverage March 1, 2010, will be eligible for the subsidy. Longer subsidy period from nine to fifteen months The subsidy period for assistance-eligible individuals (AEIs) – including anyone now receiving the subsidy – may last for up to 15 months instead of just nine months. Subsidy Amount and Involuntary Terminations – stays at 65% The subsidy amount remains at 65 percent, and eligibility is still limited to people losing health coverage due to involuntary employment terminations. AEIs with exhausted subsidy periods Individuals who exhausted their nine-month subsidy period as of November 30, 2009 could receive the subsidy for another six months. Individuals who dropped COBRA after their subsidy expired may retroactively elect COBRA back to December 1, 2009. These individuals must pay 35% of the full premium costs no later than 60 days after the date of enactment. Coverage will not be reinstated until payment is received. Anyone who continued COBRA and made higher premium payments after exhausting the subsidy would be reimbursed for the excess payments or given credits toward future premium payments.
Department of Labor website link for more detailed information
Internal Revenue Service Employer COBRA information
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