The COBRA subsidy has been extended for an additional six (6) months and eligibility to receive the subsidy extends to February 28, 2010. If you are subject to COBRA, you are required to comply with these extensions and must also provide additional notices advising of same.
Importantly, individuals who had the subsidy but dropped coverage when the subsidy expired are now allowed to re-elect COBRA. Additionally, individuals who continued COBRA coverage after their 9-month subsidy expired and paid for such coverage at the normal rate must receive a refund for their overpayment as the subsidy now may last for up to 15 months.
Notices to this affect must be sent as soon as possible, but no later than February 17, 2010. The longer you wait, however, the more administratively difficult it becomes to recalculate costs and refunds and retroactive coverage.
COBRA Subsidy Extension in General
On December 19, 2009, President Obama amended the American Recovery and Reinvestment Act of 2009 (the “ARRA”) by signing into law the Department of Defense Appropriations Act, 2010 (the “2010 DOD Act”). The ARRA provides a 65% federal subsidy for COBRA premiums for certain employees and covered family members who lost or will lose coverage under a group health plan due to involuntary termination of employment. Prior to amendment, the ARRA made the subsidy available to individuals who lost coverage due to being involuntarily terminated from employment between September 1, 2008 and December 31, 2009. The subsidy was payable for a maximum period of nine months.
The 2010 DOD Act extends eligibility for the COBRA subsidy by two months and increases the maximum period for receiving the subsidy by six months while also clarifying that it is the date of employment termination that governs eligibility for the subsidy, and not the date COBRA would otherwise begin. The subsidy extension requires immediate employer and COBRA administrator action.
Specifically, employers and COBRA administrators need to draft new notices explaining the subsidy extension, identify assistance eligible individuals that are impacted by the subsidy extension, and send those individuals the new notices. The remainder of this email summarizes the COBRA subsidy extension and details the employer’s and COBRA administrator’s additional compliance obligations.
Extension of Eligibility to February 28, 2010
The 2010 DOD Act extends the expiration date of the COBRA subsidy program by two months. Pursuant to the 2010 DOD Act, the COBRA subsidy is now available to individuals who lose group health coverage due to an involuntary termination which occurred on or before February 28, 2010. The 2010 DOD Act clarifies that eligibility for the subsidy is determined by the date of the qualifying event and not the date that the COBRA coverage begins.
Extension of Subsidy Period to 15 Months
The 2010 DOD Act extends the subsidy period from nine months to fifteen (15) months. Additionally, the 2010 DOD Act establishes a transition period for assistance eligible individuals who exhausted their subsidy eligibility before the extension was enacted. Assistance eligible individuals who reached the end of their subsidy period prior to the enactment of the 2010 DOD Act are grouped into two categories: (1) individuals who exhausted the nine month COBRA subsidy period and dropped COBRA coverage; and (2) individuals who exhausted the nine month COBRA subsidy period and continued to maintain COBRA coverage.
Employers and COBRA administrators are required to allow assistance eligible individuals who exhausted the nine month COBRA subsidy period prior the enactment of the 2010 DOD Act and dropped COBRA coverage to retroactively elect COBRA coverage. Those individuals will be eligible to receive the COBRA subsidy for up to six additional months. Assistance eligible individuals can reinstate their COBRA coverage by paying the retroactive subsidized premium by February 17, 2010, or, if later, 30 days after the notice explaining the subsidy extension is provided by the plan administrator.
Employers and COBRA administrators must identify assistance eligible individuals whose eligibility for the subsidy ended, send them a notice detailing the subsidy extension, and, assuming the individuals’ pay the 35% COBRA premium, retroactively restore their COBRA coverage.
Employers and COBRA administrators are required to allow assistance eligible individuals who exhausted the nine month COBRA subsidy period and continued to maintain COBRA coverage at 100% of the cost to receive a reimbursement payment or credit for their overpayment (ie, 65% of the COBRA premium payments after the expiration of their initial nine-month subsidy period).
Assistance eligible individuals are entitled to receive the COBRA subsidy for up to six additional months after their initial nine month period. To continue their coverage, assistance eligible individuals must pay 35% of the COBRA premium cost by February 17, 2010, or, if later, 30 days after notice of the extension is provided by their plan administrator. Employers and COBRA administrators need to calculate the individuals’ overpayments and decide whether to offset the individuals’ future COBRA premiums by the amount of the overpayments or issue refund checks.
See Employer's Notice Requirements.
See earlier COBRA Extension information.
