December 22, 2009
On December 21, 2009, President Obama signed the Department of Defense Appropriations Act, 2010 (the “Act”) extending the 65% COBRA premium subsidy originally established by the American Recovery and Reinvestment Act of 2009 (“ARRA”). The Act made the following important changes to the COBRA premium subsidy:
- Eligibility Period. Under ARRA, the COBRA premium subsidy was only available to individuals who became eligible for COBRA continuation coverage due to an involuntary termination of employment and loss of group health coverage by December 31, 2009. The Act extends the eligibility period so that individuals who are involuntarily terminated from employment by February 28, 2010, can qualify for the subsidy.
- Qualifying Event. The Act also clarifies that even if an individual does not become entitled to COBRA by February 28, 2010, (e.g., because he is receiving severance benefits) he will remain eligible for the subsidy as long as the termination of employment occurs by the deadline.
- Subsidy Length. The Act extends the maximum subsidy period for an additional six months to a total of 15 months. Individuals who reached the end of the original nine month subsidy before it was extended to 15 months will have additional time to pay the reduced premium related to the extension under a transition period.
- Transition Period. The Act establishes a transition period for individuals who lost the subsidy prior to December 21, 2009, when they reached the nine month limit. For individuals who became eligible for the subsidy on February 17, 2009 (the day ARRA was enacted), the transition period may begin as early as November 17, 2009.
- Individuals who continued COBRA coverage by paying the unsubsidized premium will need to be given a credit or refund for the amount of the subsidy.
- Individuals who stopped paying premiums when the subsidy ended will need to be provided the opportunity to receive retroactive subsidized coverage. In order to reestablish coverage, such individuals must pay the subsidized premiums by February 19, 2010, or, if later, 30 days after receiving notice of their right to reestablish continuation coverage.
Subsidy Extension Notice. Group health plan administrators are required to provide an additional COBRA notice to all individuals who either were assistance eligible individuals or had a COBRA qualifying event at any time on or after October 31, 2009, explaining the changes to the federal COBRA subsidy.
The notice must generally be provided by February 19, 2010. Individuals who experience a COBRA qualifying event related to a termination of employment after December 21, 2009, must be provided notice in accordance with the regular COBRA election notice requirements. Presumably, the information can be incorporated into the Plan Administrator’s existing COBRA notice that describes the federal subsidy.
Retroactive Election Notice. A notice must also be provided to transition period individuals who lost coverage to explain that they may retroactively elect COBRA. The notice must be provided no later than 60 days after the beginning of the transition period. This means that notices may be due as early as January 16, 2010, but will generally be due by January 30, 2010, for individuals who lost the subsidy on November 30, 2009.
Contact Information. For additional information or for questions regarding the COBRA subsidy, please contact Amy Heppner (404.888.8825) or Kelly Meyers (404.888.8838).
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