Employee Benefits-EBSA Provides Another (And Maybe Last) Word On the COBRA Subsidy

The question has come up as to whether the COBRA subsidy-introduced by the American Recovery and Reinvestment Act and paying 65% of a COBRA premium- ends on August 31, 2011. The subsidy is available for 15 months, and an employee had to be fired by no later than May 31, 2010 to be eligible. August 31, 2011 is 15 months after May 31, 2010, so one might think that the subsidy no longer applies after August 31, 2011.

That is not necessarily the case, says the Employee Benefits Security Administration (the “EBSA”) in a new set of FAQs. In Q1 of those FAQs, the EBSA says that some individuals will still be eligible to receive the subsidy beyond August 31, 2011. Individuals who qualified for the subsidy on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare, even if their COBRA coverage did not start until a later date due to the terms of a severance arrangement, or the use of banked hours or other similar provision that delayed the start of their COBRA coverage. For example if an individual was involuntarily terminated on May 31, 2010 and due to the terms of a severance agreement her COBRA coverage did not start until December 1, 2010, that individual would still be eligible for the full 15 months of subsidy through February 29, 2012 as long as she is not eligible for another group health plan or Medicare.

Q4 of the FAQs says that those individuals who qualified for the COBRA subsidy were required to pay only 35 percent of the COBRA premium otherwise due to the plan. The subsidy is available for up to 15 months. If an individual’s COBRA continuation coverage lasts for more than 15 months, that individual will need to pay the full amount to continue the COBRA coverage. If an individual is unsure when his or her 15 months of subsidy ends or how much the new premium is, the individual should contact the plan right away so that the individual can make sure that he or she pays the correct amount for the correct time period. If the individual does not make the full payment within the correct time period, his or her COBRA coverage can be canceled.