EXTENSION TO FEDERAL COBRA SUBSIDY SIGNED INTO LAW

EXTENSION TO FEDERAL COBRA SUBSIDY SIGNED INTO LAW

As you may be aware, the American Recovery and Reinvestment Act of 2009 (“ARRA”) originally provided a 65% COBRA premium subsidy for a period of up to 9 months for certain eligible employees who were involuntarily terminated from employment during the period from September 1, 2008 through December 31, 2009, and their eligible family members. Legislation signed by the President on March 2, 2010 extends the ARAA COBRA subsidy in an important way.

The period of assistance has been extended through March 31, 2010. The eligibility period for the COBRA subsidy for assistance eligible individuals has been extended through March 31, 2010 (it had previously been extended through February 28, 2010). An individual (and his or her eligible family members) will be eligible for the COBRA subsidy if the individual becomes eligible for COBRA due to involuntary termination of employment occurring between September 1, 2008 and March 31, 2010 (rather than February 28, 2010). For instance, an individual who is involuntarily terminated and loses coverage effective March 31, 2010, who becomes eligible for COBRA starting April 1, 2010, may be eligible for the COBRA subsidy, provided that he/she satisfies the other requirements for the subsidy. An involuntary termination of employment that occurs on or after March 2, 2010 and follows a qualifying event that was a reduction of hours and that occurred at any time from September 1, 2008 through March 31, 2010 is also a qualifying event for purposes of ARRA.

Extensions to the subsidy as of December 21, 2009. The length of the COBRA subsidy period had been extended to 15 months. The length of the COBRA subsidy period for assistance eligible individuals had been extended for an additional 6 months – to a total of up to 15 months (as compared with the previous limit of 9 months). This included newly eligible individuals (and their family members), individuals who were within their original 9-month subsidy period, and individuals whose original 9-month subsidy period had expired.

Individuals who are still within their original 9-month subsidy period (and continue to be eligible for the subsidy) do not need to do anything to take advantage of the additional 6 months of the subsidy. They may continue to pay 35% of the applicable COBRA premium for a total period of up to 15 months. (However, as a reminder, the subsidy will end earlier if the individual becomes eligible for other group health coverage or Medicare, or if the maximum COBRA period otherwise expires).

If an individual’s original 9-month subsidy period expired and he/she stopped paying COBRA premiums upon expiration of the subsidy, he/she will have the opportunity to pay back premiums (at the reduced rate of 35%) and continue the COBRA subsidy for a total of six additional months (for a total period of up to 15 months). However, in order to qualify for the extra 6 months of coverage, you must pay any back COBRA premiums due – at the subsidized rate. Such back premiums must have been paid by the later of: a) February 17, 2010, or b) 30 days after you receive notice of the payment due.

If, however, you are an eligible assistance individual and paid the full COBRA premium for a period of coverage after the initial 9 month COBRA subsidy period, you will be entitled to a credit for, or refund of, the excess amounts paid for the 6 month extended coverage period to which the COBRA subsidy applies. So if an individual continued on COBRA upon expiration of the 9-month subsidy period by paying the full premium rate, he/she will receive a credit for the overpayment by paying a reduced amount for COBRA coverage until the credit is exhausted, or by reimbursement of the overpayment if coverage is not continued. (Again, as a reminder, the subsidy will end before expiration of the 15-month period if the individual becomes eligible for other group health coverage or Medicare, or if the COBRA period otherwise expires).

Note that nothing changes the total duration of COBRA coverage (whether that is a total of 18 months or more), or affects the early termination of COBRA coverage when an individual fails to timely pay COBRA premiums, becomes covered by another group health plan, or becomes entitled to Medicare.

Involuntary terminations as late as March 31, 2010 can qualify, even if COBRA coverage does not commence until April 1, 2010. The extended COBRA subsidized coverage applies for eligible assistant individuals (and their eligible family members) whose qualifying event is an involuntary termination of employment that occurred between September 1, 2008 and March 31, 2010, even if the COBRA coverage does not commence until after March 31, 2010.

For more information regarding these items and other aspects of the law, please contact the Health Department within the Fund office for Assistance.