Extension of Cobra Continuation Coverage

Thursday, December 03, 2009

As you may recall, earlier this year, Congress passed a COBRA coverage extension and subsidy law as part of The American Recovery and Reinvestment Act of 2009 (ARRA). The Act provided for premium reductions and additional election opportunities for individuals who experienced a COBRA qualifying event after February 17, 2009.

COBRA qualified individuals paid 35% of their COBRA premiums and their former employer or plan sponsor paid the remaining 65%. Employers or plan sponsors were reimbursed for their portion of the COBRA premiums through a quarterly tax credit. The premium subsidy applied to coverage beginning on or after February 17, 2009 and lasted for up to nine months for the period from September 1, 2008 to December 31, 2009.

The result of ARRA was a large increase in the numbers of COBRA qualified individuals who enrolled in the COBRA coverage extension and the subsidy. Prior to the passage of ARRA, COBRA qualified individuals paid up to 102% of their health care premiums. Clearly, ARRA made COBRA more affordable to such individuals. By some accounts, COBRA enrollments doubled during the ARRA qualifying period.

There is current pending legislation in the Congress to extend ARRA. Three different bills are pending, one in the Senate (S2730) and two in the House (HR3930 & HR 3966). All three are under review by their respective committees. It is to be seen whether or not any of these three bills will be acted upon within the next few weeks.

In addition, the Affordable Health Care for America Act (H3962) extends COBRA coverage but only after the date of the Act’s enactment, i.e., January 1, 2010. The Act extends COBRA coverage until the “earlier of the date on which such individual becomes eligible … for health insurance coverage through the Health Insurance Exchange”. The Act removes any current state laws that bar COBRA qualified individuals from participating in a state’s “health benefits risk pool”. Furthermore, nothing in the Act addresses employer, plan sponsor or government subsidies or financial assistance to COBRA qualified individuals as part of this extension of coverage.