January 04, 2010
A COBRA subsidy extension has been signed into law (December 21, 2009) as part of the fiscal year 2010 Defense Appropriations Act. The Act extends the eligibility period for the American Recovery and Reinvestment Act (ARRA) premium reduction for an additional 2 months (through February 28, 2010) and the maximum period for receiving the subsidy for an additional 6 months (from 9 to 15 months). Additional COBRA subsidy extensions may also be included in other pieces of legislation, so the eligibility period may be extended even further.
Historical Overview
ARRA provided a government subsidy for Medical, Prescription, Dental and Vision coverage. The purpose of the subsidy was to make COBRA coverage more affordable for qualified beneficiaries who experienced an involuntary termination of employment between September 1, 2008 and December 31, 2009. The subsidy is equal to 65% of the COBRA premium and is available only to qualified beneficiaries defined as Assistance Eligible Individuals (AEI's). AEI's are qualified beneficiaries:
Who became eligible for COBRA continuation coverage or state law continuation coverage at any time between September 1, 2008 and December 31, 2009;
Who were eligible for COBRA due to an involuntary termination of employment during the time period noted in the previous bullet;
Who are not eligible for any other group health coverage (such as through a spouse's employer plan) or through Medicare; and
Who actually elect and pay a portion of the COBRA premium. The subsidy was due to expire at year end and the recent legislation extended the ARRA provisions.
Summary
The Defense Act provides a two-month extension of the eligibility date for the COBRA subsidy, from December 31, 2009 to February 28, 2010. The bill increases the length of the COBRA subsidy for a total of 15 months for those who have already been receiving the subsidy as well as those who are newly eligible. For those individuals who were unable to pay their full COBRA premium after the nine-month subsidy ran out, they will now have the opportunity to receive another 6 months of the COBRA subsidy for a total of 15 months.
Notice Requirements
The Defense Act imposes new notice requirements on group health plans to alert individuals to the availability of the COBRA subsidy extension. There are various categories of individuals who must receive a notice.
Categories of Individuals Who Must Receive Notice
"Assistance eligible individuals" whose COBRA subsidy expired, who paid the full COBRA premium for any subsequent period and now are entitled to an extension.
"Assistance eligible individuals" whose COBRA subsidy expired, who did not pay the full COBRA premium for any subsequent period and are now entitled to an extension.
"Assistance eligible individuals" who are currently receiving the nine-month subsidy and are now entitled to an extension.
"Assistance eligible individuals" having a qualifying event on or after October 31, 2009 and are still within their election period.
"Assistance eligible individuals" terminating after the law's enactment date (December 21, 2009).
Notice Deadlines
There are three different notice deadline dates for the COBRA subsidy extension.
For those "assistance eligible individuals" who did not timely pay the premium or paid the full premium for any period after their subsidy expired, the group health plan must provide notice of the COBRA subsidy extension within 60 days of the date the original ARRA extension ended. This notice must include information on the ability to make retroactive premium payments.
For those "assistance eligible individuals" who are currently receiving the nine-month subsidy as well as those within an election period, the notice of the COBRA subsidy must be provided within 60 days after the date of the law's enactment (December 21, 2009).
For those "assistance eligible individuals" having a qualifying event occurring after the law's enactment (December 21, 2009), the notice of the COBRA subsidy extension should meet the usual COBRA notice deadlines. In some cases, a new or revised notice will need to be sent.
How long does an individual have to pay the retroactive premium?
For individuals who failed to pay their COBRA premium because they were unable to pay the full COBRA premium after their subsidy expired, the Defense Act provides an opportunity for these individuals to retain their COBRA coverage at the reduced subsidy rate. Since a group health plan has up to 60 days to notify these individuals of the new option, their COBRA coverage may lapse, but they would be entitled to a reinstatement.
"Assistance eligible individuals" who failed to timely pay their premium have 60 days after the date of enactment (December 21, 2009), or if later, 30 days after the group health plan provides notice.
Refunds for Retroactive Subsidy
For those "assistance eligible individuals" who paid a full COBRA premium for any period after their COBRA subsidy expired, a refund or credit is due from the plan. The refund/credit rules are the same as the rules that were created in the original COBRA subsidy law. Either a reimbursement must be made to the individual or a credit must be provided that reduces subsequent premium payments.
Eligibility Based on Timing of Event
The Defense Act resolves an issue from the original ARRA law that prevented an individual from becoming eligible for the subsidy if their termination of employment occurred in December, but their COBRA did not start until January 1. The Defense Act amends the ARRA to base the COBRA subsidy on when the qualifying event occurs and not when the COBRA begins. For involuntary terminations of employment occurring February 28, 2010, the COBRA subsidy will be available even though the COBRA period will not begin until March 1.
Please contact your A.E. Mourad Agency, Inc. representative with any questions.
A.E. Mourad Agency, Inc.
28277 Dequindre, Madison Heights, MI 48071
Phone: (248) 336-1600
Fax: (248) 336-1607
Web: www.aemourad.com