Posted on March 8, 2010 by Matthew Grosh

COBRA Subsidy Extended Through March 31, 2010

The COBRA subsidy, originally outlined in the American Recovery and Reinvestment Act (ARRA) and subsequently extended, covered involuntary terminations through February 28, 2010. Without another extension, employees involuntarily terminated beginning March 1 would not have been eligible to receive this COBRA premium assistance. 

Congress had been attempting to push back the extension one more month, but that bill was blocked by Senator Jim Bunning. However, Bunning yielded last Tuesday and the extension has now been officially pushed back until March 31, 2010. This will allow qualified individuals who are involuntarily terminated before that date to reduce their health plan costs by 65% through the subsidy. A bill called the American Workers, State and Business Relief Act of 2010 includes a provision to extend the subsidy through year-end. We will continue to monitor this ever-changing situation, so please be sure to check back.

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Posted on December 29, 2009 by Christina Hausner

Updated COBRA Continuation Links on the Department of Labor Website

The United States Department of Labor's Employee Benefits Security Administration released two new resource links on the COBRA Continuation coverage.

According to the United States Department of Labor (DOL) the FAQ and other information will be updated sometime this week. If you are interested in receiving immediate updates from the DOL, consider subscribing to their COBRA webpage. By subscribing you can receive notification when the site is updated with new information. 

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Posted on December 23, 2009 by Christina Hausner

COBRA Subsidy Extended

Legislation enacted by Congress and signed by President Obama on December 21, 2009, extends the ARRA COBRA premium reduction eligibility for two months, from December 31, 2009 to February 28, 2010, and increases the maximum period for receiving the subsidy to a total of 15 months instead of 9 months. 

With the new changes, the law provides that the 65% premium subsidy for COBRA continuation health benefits is available to individuals who are eligible for COBRA as a result of an involuntary termination between September 1, 2008 and February 28, 2010. The law previously required that both the involuntary termination and the eligibility for COBRA coverage occur before the last effective date of the subsidy, but now only the involuntary termination need take place on or before February 28, 2010, not the COBRA eligibility.

Last month, when we posted on the duration of the COBRA ARRA subsidy, we noted that legislation was introduced to extend the deadline for eligibility as well as the duration of the subsidy. The change enacted this month was not a result of passage of the October legislation but rather changes added to the Department of Defense 2010 Appropriations Act.

Plan administrators must provide notice of the new extension rights to those who became assistance eligible individuals on or after October 31, 2009, or who were involuntarily terminated after October 31, 2009. It is anticipated that regulations specifying the content of the notices will be promulgated, but such notices need to be provided by February 19, 60 days from the effective date of the COBRA subsidy extension legislation. 

It appears that beneficiaries whose subsidy expired and who didn't pay the full premium, now may have the opportunity to receive retroactive subsidized coverage. In addition, beneficiaries who did pay the full COBRA premium can be refunded by the employer or receive an offset against future COBRA premiums. 

This bill was signed with little fanfare, however, the United States Department of Labor has posted a news statement on their website.
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Posted on November 4, 2009 by Christina Hausner

Update on the COBRA Subsidy and When it Will End

We have posted on the 65% COBRA subsidy several times since the American Recovery and Reinvestment Act (ARRA) was enacted.  ARRA provided for a premium subsidy for COBRA continuation health benefits to "assistance eligible individuals."  Those individuals are defined as an employee or member of his/her family who is eligible for COBRA continuation coverage:

 

1)      at any time between September 1, 2008 and December 31, 2009

2)      elects COBRA coverage, and

3)      is eligible for COBRA as a result of an involuntary termination between September 1, 2008 and December 31, 2009. 

Some changes may be effected if the Extended COBRA Continuation Protection Act of 2009, H.R. 3930, introduced in the House of Representatives on October 26, 2009 and referred to Committees on Education and Labor, Energy and Commerce, and Ways and Means, is enacted.   

Following are some of the highlights and possible changes with regard to the eligibility requirements and timing of the COBRA subsidy.

Upon Eligibility for Group Coverage or Medicare

Eligibility for the premium reduction ends when an individual becomes eligible for other group health coverage or Medicare.  It is the recipient of the subsidy who is responsible for reporting eligibility.  If an individual continues to receive the subsidy after he/she is eligible for other group health coverage, the individual may be subject to an Internal Revenue Code penalty of 110% of the subsidy provided after they became eligible for the new coverage.  Be aware that anyone who suspects that someone may be receiving the subsidy after eligibility for group coverage or Medicare may report this to the IRS using form 3949-A Information Referral.  These provisions would not be affected by the proposed Extended COBRA Continuation Protection Act of 2009.

After Nine Months of Subsidy

ARRA provides that the subsidy ends after nine months or when the maximum period of COBRA coverage ends, whichever occurs first. The proposed Extended COBRA Continuation Protection Act of 2009 would extend the nine months to fifteen months. It would also extend the maximum period of COBRA continuation coverage to 24 months.

Year End Issues

Is the subsidy available to an employee whose termination occurs in December of 2009, but the loss of coverage occurs after December 31, 2009?  The IRS answered with a clear no in Question 13 of Notice 2009-27 .  If the loss of coverage is after December 31, 2009, the individual is not an assistance eligible individual, even if he is terminated before December 31.  The 65% assistance payment currently only applies to individuals who both experience an involuntary termination prior to December 31, 2009 and who are eligible for COBRA continuation coverage before December 31, 2009. 

This is relevant due to the widespread practice of continuing active employee medical coverage through the end of the month in which a termination of employment occurs, and starting COBRA eligibility the first day of the subsequent month.  Any employee of an employer who has adopted this common administrative practice and who is involuntarily terminated in December of 2009 will not be eligible for the 65% COBRA subsidy since eligibility for COBRA continuation coverage would only begin on January 1, 2010, one day beyond the December 31, 2009 deadline. 

Absent additional guidance from the IRS or an extension of the ARRA deadline by Congress, employers who wish to avoid this result can consider changing their plan rules and administrative practices to start COBRA coverage on the last day of the month of an involuntary termination of employment instead of the first day of the following month.  Or, employees who are to be involuntarily terminated in December, can be terminated in November. 

If H.R. 3930 is enacted into law, it would extend the December 31, 2009 deadline to June 30, 2010, providing that assistance eligible individuals are those who are eligible for COBRA between September 1, 2008 and June 30, 2010 as a result of an involuntary termination between September 1, 2008 and June 30, 2010. 
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Posted on July 7, 2009 by Christina Hausner

PA Mini-COBRA Law Effective July 10, 2009

If you thought that no one in Harrisburg was doing anything but wringing their hands about the Pennsylvania state budget for the last 3 months, think again! The Pennsylvania Senate and House of Representatives got together and signed Act 2 of 2009 on June 10, mandating continuing health insurance for employees of employers with fewer than 20 employees, effective July 10, 2009.

Since 1985, the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) has required employers of 20 or more employees to provide its employees and eligible dependents continuing health insurance if they experience a qualifying event.

Under COBRA, employees or their dependents are required to pay the cost, up to 102% of the employer’s cost, to continue their health insurance. In February 2009, President Obama signed the American Recovery and Reinvestment Act providing for subsidized COBRA premiums for those employees who were involuntarily terminated after September 2008. Instead of 102%, the employees only pay 35%, and the employer fronts the remainder and receives a payroll tax credit for its payment. But this plan was available only to those who were subject to COBRA, not the smallest of employers. 

On July 10, 2009, when the Pennsylvania Mini-COBRA law becomes effective, the ARRA subsidy will apply to almost all employers in Pennsylvania. Currently, employers with fewer than 20 employees are not required to offer COBRA continuation coverage, leaving employees to shop for transitional policies which may not provide coverage for pre-existing conditions, prescriptions or maternity. Now employers who sponsor group medical insurance and have 2-19 employees will be required to offer employees and their dependents the opportunity to purchase up to nine months of continuation coverage on the employers group plan. 

While Pennsylvania’s Mini-COBRA is modeled after the federal COBRA law, there are some differences:

PA Mini-COBRA

Federal COBRA

Applies to employers with 2-19 employees

Applies to employers with 20 or more employees

Requires continuation coverage for up to nine months

Coverage is generally capped at 18 months, and may extend to 36 months

Applies only to insured group major medical, hospital or surgical policies. Also, Health Savings Accounts and other medical spending accounts are treated differently.

Applies to all ERISA group health plans

Applies only to insured arrangements, not self-insured programs

Covers both insured and self-insured

Permits an employer to charge up to 105% of group rate

Provides for a maximum charge of 102%

Coverage ends when a participant becomes eligible for other coverage, a group health plan or Medicare

Coverage ends when a participant enrolls in another group plan or Medicare

The insurer is given most of the burden of compliance with this Act

The employer is ultimately responsible for compliance, including providing proper notification to eligible individuals

Individuals must have 3 months of preceding coverage to be eligible

Eligible individuals need only one day of coverage before the qualifying event

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Posted on May 7, 2009 by Christina Hausner

Maintaining Eligibility for the COBRA Subsidy

I recently received a question from a reader that may be of interest to others. Following is a portion of the question and my response:

I read your article on COBRA it was very informative, Could you please tell me where I can get an answer to this question. I was laid off from my job in February. I am getting COBRA under the ARRA where my former employer pays 65% of my health benefits. I also am collecting unemployment.

My former company wants me to work a few weekend for them, will I loose my COBRA benefits if I do this.

The American Recovery and Reinvestment Act (ARRA) premium assistance subsidy ends not when you become employed but only when you become eligible for Medicare or another group health plan (such as a plan sponsored by a new employer or a spouse's employer). In fact the law imposes a duty on the recipient to notify the plan if they become eligible for coverage under another group health plan or Medicare, and failure to do so can result in a tax penalty. The subsidy will also end 9 months after the first day of the first month to which the subsidy applies or when COBRA benefits are no longer available to you. 

Generally, COBRA coverage is available for 18 months after termination of employment and may end earlier if: 

  • Premiums are not paid on a timely basis
  • The employer ceases to maintain any group health plan
  • After the COBRA election, coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary. However, if other group health coverage is obtained prior to the COBRA election, COBRA coverage may not be discontinued, even if the other coverage continues after the COBRA election.
  • After the COBRA election, a beneficiary becomes entitled to Medicare benefits. However, if Medicare is obtained prior to COBRA election, COBRA coverage may not be discontinued, even if the other coverage continues after the COBRA election.

The COBRA statute provides that eligibility for coverage ends on the date that the individual first becomes covered under any other group health plan (as an employee or otherwise) which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary. However, this year's ARRA provides that eligibility for subsidy ends the first date that the individual is eligible for coverage under any other group plan, coverage under a flexible spending arrangement or coverage of treatment furnished by the employer, without mention of any exclusion or limitation with respect to any pre-existing condition.

I hope this answers your question, which we thought was an interesting one.

 

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Posted on March 19, 2009 by Christina Hausner

Updated Resources for COBRA Continuation Assistance under ARRA

Many employers and third party administrators have been waiting for guidance from the DOL before issuing the new COBRA notices required under the American Recovery and Reinvestment Act (ARRA). The wait is over. The Department of Labor has finally updated its FAQs For Employers About COBRA Premium Reduction Under ARRA.  It now includes the much anticipated  model notices. The DOL website gives the following guidance for notice requirements and deadlines:

  • A general notice to all qualified beneficiaries, whether they are currently enrolled in COBRA coverage or not, who have a qualifying event during the period from September 1, 2008 through December 31, 2009. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
  • A notice of the extended COBRA election period to any Assistance Eligible Individual (or any individual who would be an Assistance Eligible Individual if a COBRA continuation coverage election were in effect); who had a qualifying event at any time from September 1, 2008 through February 16, 2009; and who either did not elect COBRA continuation coverage or who elected but subsequently discontinued COBRA. This notice must be provided within 60 days following February 17, 2009.

The DOL’s COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act Of 2009 page continues to be updated with additional resources. You can download Job Loss Posters and Flyers and review Frequently Asked Questions for employers and employees.

In addition the DOL site also provides a link to the page the IRS has dedicated to COBRA Health Insurance Continuation Premium Subsidy. This page includes the updated Form 941 and Instructions and information on the phase out of the subsidy:

 

  • This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.
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Posted on February 26, 2009 by Christina Hausner

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.)

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Posted on March 20, 2007 by Christina Hausner

FMLA, ADA, COBRA, OSHA . . . is your workforce covered?

Who's an Employer?  In the past week, I've had occasion to talk to several HR professionals about how the number of employees can define whether various employment laws apply, and that just a few employees either way can make a big difference, particularly for small employers.  Pay attention to the following shortlist, particularly if you have turnover and frequent changes in the number in your workforce.  Remember that how part time employees are counted also changes from statute to statute.  There may also be exemptions from coverage for certain industries like agriculture.    

 

      Total Number of Employees:                          Subject to the following employment laws:

  • All employers regardless of size . . . . . . OSHA, Equal Pay Act (EPA), Immigration Reform and Control Act (IRCA)
  • You have 4 or more employees . . . . . .  Pennsylvania Human Relations Act, Lancaster County Human Relations Ordinance
  • You have 15 or more employees . . . . . . Title VII,   Americans with Disabilities Act (ADA)
  • You have 20 or more employees . . . . . .  Age Discrimination in Employment Act, COBRA  
  • You have 50 or more employees . . . . . . Family and Medical Leave Act (FMLA)
  • You have 100 or more employees . . . . . . Worker Adjustment and Retraining Notification Act

The above is a partial list of statutes and law that apply to employers in Pennsylvania. For more information federal discrimination laws, consult the EEOC website.

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