On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA). The ARRA, commonly known as the stimulus package, includes temporary changes to the COBRA continuation coverage rights of certain qualified individuals resulting from involuntary terminations. The changes include, among other things, a subsidy of COBRA premiums, new notice requirements, and the option to enroll in alternative less expensive coverage.
The government subsidy of the COBRA premiums consists of a 65% reduction in COBRA premiums for up to 9 months of the coverage period. To qualify for the COBRA premium subsidy, a qualified beneficiary must meet the following requirements:
- be eligible for COBRA continuation coverage at any time during the period commencing on September 1, 2008 and ending on December 31, 2009;
- must elect such COBRA coverage; and
- the qualifying event which triggers COBRA coverage must be the involuntary termination of a covered employee’s employment during the period commencing on September 1, 2008 and ending on December 31, 2009.
Employers sponsoring health plans must cover the 65% subsidy or discounted premium not paid by the qualified beneficiaries and recoup such subsidies as a deduction from federal payroll taxes or as a reimbursement, if applicable.
The subsidy will apply to premiums for coverage periods beginning after the date of the enactment of the ARRA. For most plans, which are based on a monthly coverage period, the first coverage period will begin on March 1, 2009. The subsidy will be available for up to 9 months unless the individual becomes eligible for other group health coverage or Medicare prior thereto.
Individuals who qualify for the subsidy and who waived COBRA coverage may now elect COBRA coverage during a period of 60 days from receiving a new required notice of such special election rights. Also, qualified individuals may be eligible to elect coverage options which are less expensive than those in which they were enrolled, if the employer chooses to make such options available.
Employers sponsoring health plans are required to notify qualified individuals of their special right to elect COBRA coverage and/or to enjoy the subsidy benefits established by the ARRA. Such notice must be provided within 60 days after the enactment of the Act. Employers must also modify or supplement their COBRA election forms for qualified beneficiaries resulting from involuntary terminations henceforth until December 31, 2009, in order to notify the rights under the ARRA. The Department of Labor should issue model notices within 30 days of the enactment of the ARRA.
Eligible individuals who pay more than 35% of the full COBRA premium for coverage on or after March 1, 2009 must receive either a reimbursement of the excess amount or a credit for the excess amount that will reduce subsequent premium payments. However, the credit option is available only if it is expected that the full credit will be used by the eligible individual within 180 days of the date the individual paid the full COBRA premium amount not taking into account the subsidy.
The ARRA addresses multiple issues related to the COBRA election and subsidy rights established therein, including reimbursement procedures, reporting requirements, appeals procedures for denials of eligibility and tax implications of the subsidy, among others. We include a link to the webpage of the United States Department of Labor titled “COBRA Continuation Coverage Assistance under the American Recovery and Reinvestment Act of 2009”, which provides helpful information about the ARRA topics discussed herein. http://www.dol.gov/ebsa/cobra.html
If you have any questions or wish additional information regarding this matter, please contact any of the attorneys of NOLLA, PALOU & CASELLAS, LLC.
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