COBRA Changes under the American Recovery and Reinvestment Act (ARRA)
Everyone's trying to get up to speed on the changes prescribed under Title III of the American Recovery and Reinvestment Act signed into law by President Obama on February 17, 2009. Unlike most legislation which allows for a lengthy lead time for implementation, this Act will affect those who were involuntarily terminated even before the enactment of ARRA, and new COBRA notices are required by April 18. The new notices will need to be sent to employees who were involuntarily terminated from employment after September 1, 2008, whether the employees elected COBRA coverage or not.
Who
Employees (and employers of employees) who lost or will lose health insurance coverage under an employer-sponsored plan due to a involuntary termination of employment between September 1, 2008 and December 31, 2009 (but not if individual's modified gross income exceeds $290,000 for joint return filers and $145,00 for all others. Those with joint adjusted gross income of $250,000/$125,000 are entitled to a reduced subsidy.)
What
"Assistance eligible individuals" will be able to secure COBRA health insurance continuation coverage for 35% of the cost as opposed to 102%.
When
Now. The subsidy is available for a maximum of 9 months, and ends upon eligibility for coverage under any other group health plan, or the expiration of the maximum allowable period of continuation coverage.
Where
Every workplace subject to COBRA, generally those employing more than 20 employees.
Why
With so many losing work, and health insurance premiums so high, a 65% reduction in premium will allow more unemployed persons to continue coverage.
Details
The employer pays the 65% balance which is then reimbursed to the employer by a credit on payroll taxes. Employees who were involuntarily terminated after September 1, 2008 and before February 17, 2009 (the effective date of ARRA) who did not elect COBRA coverage will now be given another opportunity to do so. Employees who were involuntarily terminated after September 1, 2008. and did elect COBRA coverage prior to February 17, 2009 can receive the subsidy from the effective date of ARRA either by reimbursement from the employer or through a credit against future COBRA premium payments.
Although COBRA continuation coverage is available to individuals who lose their employment for any reason (except gross misconduct which generally is criminal conduct), this subsidy is available only to those whose employment was involuntarily terminated. It does not apply to those who voluntarily terminated employment, or to those who became eligible for COBRA coverage by reason other than a separation from employment. The existing prohibition from COBRA eligibility for gross misconduct continues to apply.
The Secretary of Labor or the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury, shall implement an appeal process for those who are denied the COBRA subsidy in which a determination regarding eligibility shall be issued within 15 business days. This is the process in which questions such as whether termination was voluntary or involuntary will be decided. (If you think that's not something that would often be contentious, think again, or ask an Unemployment Compensation referee.)
Does a company with less than 20 people have to offer COBRA insurance?
Sincerely,
Rick
Rick,
Thank you for your comment. You may find one of my previous posts to be of interest - FMLA, ADA, COBRA, OSHA... is your workforce covered? This post addresses your question, however, please be aware that laws may vary from state to state.
http://www.paemploymentlawblog.com/2007/03/articles/employer-liability/fmla-ada-cobra-osha-is-your-workforce-covered/
Since the content of the Pennsylvania Employment Law Blog has now been merged with the Lancaster Law Blog. The URL given in response to Rick's question has changed,the new URL for the article FMLA, ADA, COBRA, OSHA... is your workforce covered? is now at http://www.lancasterlawblog.com/2007/03/articles/employment-law/employee-relations-management/fmla-ada-cobra-osha-is-your-workforce-covered/.
We use a third-party to handle our COBRA (Ceridian). Does Ceridian handle informing the employees who are eligible for this since they bill the employee or are we (the employer) responsible? When Ceridian sends the employee the bill for the month will it reflect the change in cost or is there something we have to do, so the employee only pays 35%?
Thanks for the help.
Employer's are ultimately responsible to ensure that the COBRA rules are followed. However, many employers work with third party administrators (TPAs) who handle notice and collection. You should communicate with your TPA to let it know if you have employees who are eligible for the COBRA subsidy. You will also need to coordinate reimbursement of the subsidy through your payroll preparer as the subsidy is returned to the employer as a credit on payroll tax. By this time most third party administrators, payroll preparers and accountants have been in contact with their clients regarding the ARRA 65-35% subsidy. If you have not heard from them, you should contact them as soon as possible.