No COBRA Subsidy in Unemployment Benefits Extension
The emergency jobless benefits bill that cleared Congress today does not revive the COBRA subsidy for involuntary terminations. The subsidy expired with respect to terminations after May 31st.
COBRA Subsidy Available for Reduction in Hours Followed by Involuntary Termination
There is a second bite at the COBRA apple for employees who initially lost group health plan coverage as a result of a reduction in hours of employment during the period beginning September 1, 2008, which is followed by an involuntary termination of employment on or after March 2, 2010. These individuals (and their affected family members) would normally not be eligible for COBRA continuation of coverage because they were not covered by the health plan on the day before the termination of employment. However, the Temporary Extension Act of 2010 extends the availability of COBRA continuation of coverage, and the 65% COBRA subsidy, where there is a reduction in hours (resulting in a loss of coverage) followed by an involuntary termination of employment.
If the employee did not make a COBRA election when eligible as a result of the reduction in hours, or made the election and later dropped coverage, the involuntary termination of employment is treated as a qualifying event. However, the 18 month period of COBRA continuation is considered to have begun at the reduction in hours qualifying event. Therefore, the COBRA subsidy for involuntary terminations is only available for the difference between 18 months and the number of months of COBRA available after the loss of coverage due to reduction in hours.
For example, if a reduction in hours qualifying event occurred on 11/30/2009, COBRA would have begun on 12/1/2009 and would end on 5/31/2011. If that individual had an involuntary termination on 3/9/2010 (with the loss of coverage at the end of the month in which the termination occurred, 3/31/2010), the post-termination COBRA continuation would be offered from 4/1/2010 through 5/31/2011 (18 months – 4 months of reduction-of-hours COBRA = 14 months). Because the entire post-termination COBRA period is less than 15 months, the 65% COBRA subsidy will be available for the entire 14-month period.
The COBRA administrator must provide a notice describing this new right to elect subsidized COBRA to qualified beneficiaries who lost group health plan coverage as a result of reduction in hours on or after 9/1/2008 and who are terminated between 3/2/2009 and 3/31/2009 (proposals in Congress would extend this date to 12/31/2009). The notice must be provided within 60 days following the involuntary termination of employment.
COBRA Subsidy Extended Through March 31
This morning, President Obama signed the Temporary Extension Act of 2010 (H.R. 4691) after Senator Jim Bunning of Kentucky agreed to end his filibuster and the Senate voted Tuesday night to pass the measure.
The Act, generally referred to as an extension of unemployment benefits, also extends eligibility for the 65% COBRA subsidy to individuals who have involuntary terminations through March 31, 2010. Eligibility had expired for terminations after February 28, 2010. The law is retroactive, so that persons who were involuntarily terminated on March 1st and 2nd are eligible for the subsidy. No other changes in the terms of the COBRA subsidy were made.
Employers and other health plan sponsors should adjust their COBRA notices to reflect the new March 31, 2010 subsidy eligibility expiration date.
President Signs 2010 Defense Appropriations Bill, Which Includes COBRA Subsidy Extension
On December 21, 2009, the President signed H.R. 3326, which includes the COBRA subsidy changes discussed in yesterday's blog entry. The enactment of this law means that by February 19, 2009, administrators of group health plans must issue a notice describing the COBRA changes to individuals who were eligible for the subsidy or who experience(d) a COBRA qualifying event at any time on or after October 31, 2009. This notice should describe:
- The extension of the maximum COBRA subsidy period from 9 months to 15 months;
- The extension to February 28, 2010, of the qualifying date for an involuntary termination entitling the COBRA qualified beneficiary to the COBRA subsidy as an "assistance eligible individual";
- The right of qualified beneficiaries whose COBRA terminated after October 31, 2009 (due to failure to pay the higher COBRA premium) to reinstate coverage retroactively by paying the subsidized premium (the 35% amount) by February 19, 2010, or by 30 days after the notice is provided, whichever is later;
- The right of assistance eligible qualified beneficiaries who paid the unsubsidized premium for COBRA for periods after October 31, 2009, to receive a refund or obtain a credit of the overpaid amount. (The administrator can choose the option it prefers: refund or credit).
Watch the U.S. Department of Labor website, www.dol.gov/cobra, for more information and, possibly, a model notice.
2010 Defense Appropriations Bill Impacts COBRA Subsidy
On Saturday, the Senate passed the 2010 Defense Appropriations Bill, which contains an extension of the ARRA subsidy for COBRA continuation of health coverage. The Senate Bill is identical to the House Bill, and the President is expected to sign the bill this week. That signature date is important because it is the "enactment date," which drives some of the payment and notice requirements described below.
The Appropriations Bill does the following with respect to the 65% COBRA subsidy:
- Individuals who are involuntarily terminated through February 28, 2010, will be eligible for the subsidy (the previous date was December 31, 2009);
- The maximum subsidy period is extended to 15 months from the original 9 months;
- Individuals whose subsidized COBRA coverage has already ended (some may have ended during November, 2009) have 60 days from the date of enactment (or 30 days after the notice discussed in the next bullet point, if later) to pay the 35% subsidized premium amount and obtain retroactive coverage by the subsidized COBRA. If the full premium was already paid, the "overpayment" amount can be refunded or credited towards future coverage;
- Within 60 days of the enactment of the law, Administrators of group health plans must provide a notice describing the foregoing to individuals who were eligible for the subsidy or who experienced a COBRA qualifying event at any time on or after October 31, 2009;
- The bill also "fixes" a problem recently identified in Department of Labor Q&As: The subsidy will be available to individuals who have a COBRA qualifying event (involuntary termination) through February 28, 2010. The previous law said that a terminated employee had to be eligible for COBRA by the expiration date. This is a subtle difference, but it caused an earlier termination of the subsidy than had been contemplated by Congress.
