COBRA Subsidy Extended

Wednesday, December 23, 2009

On Monday, December 21, President Obama signed intro law the Department of Defense Appropriations Act for 2010 (HR 3326) that contained amendments extending the 65% COBRA health insurance premium subsidies for an additional six months. Assistance Eligible Individuals (AEI's) will have the ability to extend subsidized COBRA coverage for 15 rather than the original 9 months of coverage as mandated in the American Recovery and Reinvestment Act (ARRA). The new provisions effective retroactively amends ARRA, enacted earlier this year. Plan sponsors and COBRA administrators will need to take action now in order to meet the upcoming compliance deadlines.

ARRA was scheduled to expire on 12/31/2009, however, the amendments extends eligibly for the 65% subsidy through 02/28/2010. AEI’s were eligible for a 65% subsidy of their COBRA premiums for a period up to nine months, provided their loss of group health coverage resulted from “involuntary” separation of employment, excluding gross misconduct and the qualifying event occurred within the period from 09/01/2008 to 12/32/2009. AEI’s are now eligible for the COBRA subsidy if the qualifying event (involuntary separation) occurs by 02/28/2010.

In summary:
The subsidy time frame is expanded from 9 to 15 months.

The eligibility period for a qualifying event is expanded from 09/01/2008 – 12/31/2009 to 09/01/2008 – 02/28/2010.

The new law requires only that the COBRA qualifying event occurs by 02/01/2010 and NOT the commencement of COBRA coverage by that date.

COBRA participants who failed to pay or made partial payments, will have the ability to make-up missed payments during a transition period i.e., 01/01/2010 to 02/28/2010.

During the transition period, COBRA participants will be treated as having paid timely if they: were covered by COBRA preceding the transition period; i.e., 01/01/2010 to 02/28/2010 and the participant makes payment within 60 days after the law’s enactment date or within 30 days after the new notices are distributed.

If the AEI paid the full COBRA amount (up to 102%) during the transition period, the new law allows for the AEI to be reimbursed for the excess amounts.

Plan sponsors or their administrators must notify, wintin 60 days, current COBRA participants and individuals who have a qualifying event of the law’s extension rights. This applies to AEI’s on or after 10/31/2009 through 02/28/2010.

Plan sponsors can expect the departments of Labor and Health and Human Services as well as the Internal Revenue Service to possibly issue guidance concerning the subsidy extension. However, there is no certainty that any of these agencies will produce any instructions quickly.

Plan sponsors should contact their legal council or COBRA administrator to determine the next steps required to ensure they are in full compliance with the amended law.