Employee Benefits-The DOL Issues A Fact Sheet Which Discusses The Extension Of The COBRA Premium Reduction Subsidy

Here is some information from the Fact Sheet:

The American Recovery and Reinvestment Act of 2009 (“ARRA”), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 (“DODA”) provides for premium reductions for health benefits under COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee’s employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months. The premium reduction for an individual ends upon eligibility for other group coverage or Medicare, after 15 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare. If an individual’s modified adjusted gross income (“modified AGI”) exceeds $125,000 (or $250,000 for joint filers), then the amount of the premium reduction must be repaid, in increasing amounts as modified AGI increases. Thus, an individual may waive his or her right to the premium reduction.

COBRA generally does not apply to plans sponsored by employers with fewer than 20 employees. Many States have requirements which are similar to COBRA for insurance companies that provide coverage to small employers. The ARRA/DODA premium reduction is available for insurers covered by these State laws.

DODA extended the COBRA premium reduction eligibility period for two months until February 28, 2010 and increased the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). In addition, individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay the 35 percent of the premium by February 17, 2010, or, if later, 30 days after notice of the extension is provided to them by their plan administrator. Individuals who lost their subsidy and paid the full 100 percent premium in December 2009 should contact their plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the overpayment.

ARRA, as amended, mandates the provision of certain notices. As part of the COBRA election notice, plan administrators must provide information about the premium reduction to all individuals who have COBRA qualifying events from September 1, 2008 through February 28, 2010. Plan administrators must also provide notice about the changes made to the premium reduction rules by DODA to individuals who have already been provided a COBRA election notice (unless the election notice included the updated premium reduction information) as follows:
• Individuals who are eligible for the premium reduction must be provided this notice by February 17, 2010;
• Individuals who experience a termination of employment on or after October 31, 2009 and lose health coverage must be provided this notice within the normal timeframes for providing continuation coverage notices; and • Individuals who are in a “transition period” (a period that begins immediately after the end of the nine months of premium reduction in effect under ARRA before the amendments made by DODA, as long as those nine months ended before December 19, 2009 and the premium reduction requirements of DODA would apply due to the extension from nine to 15 months) must be provided this notice within 60 days of the first day of the transition period.