Employee Benefits-DOL Proposes Application Form On Which Claims For Denied COBRA Subsidy May Be Filed

The American Economic Recovery and Reinvestment Act of 2009 (the “Act”) contains relief for certain COBRA recipients. Under the Act, individuals who become eligible for COBRA coverage due to an involuntary termination of employment (other than for gross misconduct) occurring from September 1, 2008 through December 31, 2009 are eligible to pay a reduced premium for COBRA coverage for up to 9 months, starting March 1, 2009. Such individuals include the terminated employee and his or her spouse and dependents, and are referred to as “Assistance Eligible Individuals” or “AEIs”. This premium reduction, which equals 65% of the amount otherwise required to be paid, is referred to as the “Subsidy”.

The Act contemplates that an employer or insurer may deny the Subsidy, or any COBRA continuation coverage, to an AEI, and provides that the Department of Labor will establish a procedure by which it may review these denials on an expedited basis. The Department is required to act on this matter in consultation with the IRS and must make a determination as to an AEI’s eligibility for the Subsidy and COBRA continuation coverage within 15 business days after receipt of an AEI’s application for review under its procedure. The Department has now issued a proposed application for a review of a Subsidy/COBRA coverage denial and a supporting statement. The proposed application is here and the supporting statement is here.

Note that the Department of Labor’s application would be used by AEIs who are denied the Subsidy or COBRA coverage with respect to a private employer’s group health care plan that is subject to the federal COBRA rules. The Act provides a subsidy for certain individuals covered under the group health plan of a federal, state or local government, or under an insured arrangement which is subject to state-law health care continuation requirements that resemble federal COBRA. For these individuals, the Centers for Medicare & Medicaid Services (CMS) has proposed an application form, and has issued a supporting statement, which is similar to the Department of Labor’s application form and statement. The CMS form and statement are here.