The stimulus package, which was enacted as the American Recovery and
Reinvestment Act of 2009 (ARRA) temporarily reduces the premium for COBRA
coverage for eligible individuals. COBRA (the Consolidated Omnibus Budget
Reconciliation Act of 1985) allows certain people to extend
employer-provided group health coverage, if they would otherwise lose the
coverage due to certain events such as divorce or loss of a job.
Individuals who are eligible for COBRA coverage because of their own or a family member's
involuntary termination from employment that occurred from September 1, 2008 through December 31, 2009 and who elect COBRA, may be eligible to pay a reduced premium. Eligible individuals pay only 35% of the full COBRA premiums under their plans for up to 9 months. The employer (or other responsible entity) may recover the remaining 65% of the premium by taking the subsidy amount as a credit on its quarterly employment tax return. This premium reduction is generally available for continuation coverage under the Federal COBRA provisions, as well as for group health insurance coverage under state continuation coverage laws.
If the individual was offered Federal COBRA continuation coverage as a result of an involuntary termination of employment that occurred at any time from September 1, 2008 through Feburary 16, 2009, and that individual declined to take COBRA at that time, or elected COBRA and later discontinued it, he/she may have another opportunity to elect COBRA coverage and pay a reduced premium.
The COBRA premium reduction provisions apply to all group health plans
sponsored by private-sector employers or employee organizations (unions)
subject to the COBRA rules under the Employee Retirement Income Security
Act of 1974 (ERISA). They also apply to plans sponsored by State or local
governments subject to the continuation provisions under the Public Health
Service Act, and plans in the Federal Employee Health Benefits Program (FEHBP).
The premium reduction is also available for group health insurance that is
required by State law to provide comparable continuation coverage (such as
“mini-COBRA”).
ARRA makes the premium reduction available for "assistance eligible
individuals." An Assistance Eligible Individual is a COBRA qualified
beneficiary who meets the following requirements:
Is eligible for COBRA continuation coverage at any time during the period from September 1, 2008 through December 31, 2009;
Elects COBRA coverage (when first offered or during the additional election period provided by ARRA); and
The COBRA election opportunity relates to an involuntary termination of employment that occurred at some time from September 1, 2008 through December 31, 2009.
However, if the individual is eligible for other group health coverage (such as through a new employer’s plan or a spouse's plan) or Medicare he/she is not eligible for the premium reduction.
If the employee's termination of employment was for gross misconduct, the employee and any dependents generally would not qualify for COBRA or the premium reduction.
Electing the premium reduction disqualifies the individual for the Health Coverage Tax Credit. Additionally, certain high-income individual may have to repay the amount of the premium reduction through an increase in their income taxes. If the amount earned for the year is more than $125,000 (or $250,000 for married couples filing a joint federal income tax return), individuals may have to repay all or part of the premium reduction through an increase in their income tax liability for the year. For more information, visit the
IRS
web page on ARRA.
Being told not to come back to work until further notice is a
termination of employment for purposes of COBRA and the ARRA premium
reduction provisions. For more information on what is an
involuntary termination of employment, see IRS
guidance.
Qualified beneficiaries whose qualifying event was an involuntary
termination of employment during the period from September 1, 2008 through
February 16, 2009 who did not elect COBRA when it was first offered OR who
did elect COBRA but are no longer enrolled (for example, those who dropped
COBRA coverage because they were unable to continue paying the premium)
have a new, second election opportunity. Individuals eligible for the
extended COBRA election period must receive a notice informing them of
this opportunity. This notice must be provided by April 18, 2009 and
individuals have 60 days after the notice is provided to elect COBRA.
However, this special election period does not extend the period of COBRA
continuation coverage beyond the original maximum period (generally 18
months from the employee's involuntary termination). COBRA coverage
elected in this special election period begins with the first period of
coverage beginning on or after February 17, 2009.
Under ARRA, this special election period opportunity is not required to be provided with respect to State continuation coverage that is provided pursuant to State insurance law. A State can take action, however, to provide an additional election period in its continuation coverage program for individuals involuntarily terminated from September 1, 2008 through February 16, 2009 in order for them to request premium assistance based upon involuntary termination occurring during that period. For more information on rights and responsibilities regarding election periods under State law, contact your State insurance commissioner’s office or CMS.
Yes, plans and issuers are required to notify qualified beneficiaries
regarding the premium reduction and other information about their rights
under ARRA as follows:
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. (See questions 14-16 for additional information regarding the General Notice.)
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. (See questions 18-19 for additional information regarding the Notice in Connection with Extended Election Periods.)
Unless specifically modified by ARRA, the existing COBRA notice manner and timing requirements continue to apply.
Under the State programs, the issuer of the group health plan must provide the notice to qualified beneficiaries with the information on how to apply for the premium reduction. These notices must be provided within the time required by State law.
The notices must include the following information:
The forms necessary for establishing eligibility for the premium reduction;
Contact information for the plan administrator or other person maintaining relevant information in connection with the premium reduction;
A description of the second election period (if applicable to the individual);
A description of the requirement that the Assistance Eligible Individual notify the plan when he/she becomes eligible for coverage under another group health plan or Medicare and the penalty for failing to do so;
A description of the right to receive the premium reduction and the conditions for entitlement; and
If offered by the employer, a description of the option to enroll in a different coverage option available under the plan.
Yes. The Department of Labor has developed model notices
that are available.
Yes. Group health plans are permitted, but not required, to allow
qualified beneficiaries to enroll in coverage that is different than the
coverage they had at the time of the qualifying event. ARRA provides that
changing coverage will not cause an individual to be ineligible for the
COBRA premium reduction, provided that:
The premium for the different coverage is the same or lower than the coverage the individual had at the time of the qualifying event;
The different coverage is also offered to active employees; and
The different coverage is not limited to only dental coverage, vision coverage, counseling coverage, a flexible spending account, or an on-site medical clinic.
If the plan permits individuals to change coverage options, the plan must provide the individuals with a notice of their opportunity to change. Individuals have 90 days to elect to change their coverage after the notice is provided.
The employer (or other responsible entity) may recover the subsidy
provided to Assistance Eligible Individuals by taking the subsidy amount
as a credit on its IRS Form 941 quarterly employment tax return.
For more information on the Form 941 credit and the tax provisions in ARRA, visit the
IRS web site.
No. There is no premium reduction for premiums paid for periods of
coverage prior to February 17, 2009.
If an individual meets the requirements of an Assistance Eligible
Individual and pays 100 percent of the premium in March or April for
coverage in those months, the overpayment can be applied as a credit
toward subsequent premiums as long as it can be used within 180 days of
the overpayment. Otherwise, the overpayment must be reimbursed to the
individual within 60 days of receipt.
Yes. Individuals who are denied treatment as Assistance Eligible
Individuals and thus denied eligibility for the premium reduction may
request an expedited review of the denial. The Department of Labor will
handle appeals related to private sector employer plans subject to
ERISA’s COBRA provisions. The Department of Health and Human Services
will handle appeals for Federal, State, and local governmental employees,
as well as appeals related to group health insurance coverage provided
pursuant to state continuation coverage laws. The Departments must make a
determination within 15 business days of receipt of a completed request
for review. The Department of Labor is currently developing a process and
an official application form that will be required to be completed for
appeals. The process will include obtaining information from the employer,
plan or insurer where appropriate. There will be a very short turn around
time for submission of this information due to the short time for the
determination.
Plans subject to the Federal COBRA provisions must send the full version
of the General Notice to individuals meeting all of the following
criteria:
-
Qualified beneficiaries (not just covered employees);
-
Who experienced a qualifying event at any time from September 1, 2008 through
December 31, 2009 (regardless of the type of qualifying event); and
-
Who either:
-
Have not yet been provided an election notice;
or
-
Who were provided an election notice on or after February 17, 2009 that did
not include the additional information required by ARRA.
Yes, if the qualified beneficiary meets all the other criteria of the
answer to question 14. That is, the type of qualifying event does not
matter for purposes of the General Notice.
The abbreviated version of the general notice, which includes the same
information as the full version regarding the availability of the premium
reduction and other rights under ARRA, but does not include the COBRA
coverage election information, may be sent in lieu of the full version to
individuals who meet all of the following criteria:
-
Have experienced a qualifying event on or after
September 1, 2008;
-
Have already elected COBRA coverage;
and
-
Currently have COBRA coverage.
States may impose separate continuation coverage requirements on health
insurance issuers. Health insurance issuers that provide group health
insurance coverage comparable to COBRA should send the Alternative Notice
to individuals covered by State-mandated continuation coverage laws
(including mini-COBRA laws). Continuation coverage requirements vary among
States. Therefore, issuers should conform these notices to applicable State
law.
Plans subject to the Federal COBRA provisions must send the Notice in
Connection with Extended Election Periods to any AEI (or any individual
who would be an AEI if a COBRA continuation election were in effect)
who:
-
Had a qualifying event that was an involuntary
termination of employment at any time from September 1, 2008 through
February 16, 2009; and
-
Either did not elect COBRA continuation coverage, or
elected but subsequently discontinued COBRA.
This notice must include information regarding ARRA’s additional
election opportunity, as well as premium reduction information, and must be
provided by April 18, 2009.
Issuers are not required to send this notice under ARRA. However, State
laws may require an additional election period and may require issuance of
a similar notice.
Individual A should get an abbreviated general notice
because
A had a qualifying event during the ARRA required period
(from September 1, 2008 through December 31, 2009), enrolled in COBRA
coverage, and still has it. (Note: it does not matter what type of
qualifying event made A
eligible for COBRA.)
Individual B should get a Notice of Extended Election
Period because
B’s
qualifying event was an involuntary termination of employment that
occurred during the period between September 1, 2008 and February 16, 2009
(before ARRA’s enactment) and B did not elect COBRA
coverage.
No. C is not entitled to the General Notice because C’s
election notice met the requirements of 29 CFR 2590.606-4 and was provided
before ARRA’s enactment. C is not entitled to the Notice
in Connection with Extended Election Periods because C’s
qualifying event was not an involuntary termination of employment.
If Individual D does not have a COBRA election in effect on
February 17, 2009 (the date of ARRA’s enactment), D is
entitled to a Notice in Connection With Extended Election Periods. In
addition, D is entitled to a full general notice because D
had a qualifying event during the ARRA-required period (September 1, 2008
through December 31, 2009); D’s election notice was
provided on or after ARRA’s enactment (that is, on or after February 17,
2009); and it did not contain the additional information required by ARRA.
Even though D’s qualifying event occurred before ARRA’s
enactment, the election notice was provided after ARRA’s enactment and
did not contain the additional information required by ARRA. D’s
plan may combine information to avoid duplication, but the information
should make clear that D has two separate election periods,
each election period has a different coverage start date, and that D
is eligible for the premium reduction for periods of coverage beginning on
or after February 17, 2009, regardless of which election period D
exercises.
Individual E should get an abbreviated general notice for
the medical plan because E had a qualifying event during
the ARRA-required period (from September 1, 2008 through December 31,
2009), enrolled in COBRA coverage, and still has it. (Note: it
does not matter what type of qualifying event made E
eligible for COBRA.) Individual E should also get a Notice
of Extended Election Period for the dental plan because E’s
qualifying event was an involuntary termination of employment that
occurred during the period between September 1, 2008 and ARRA’s
enactment (February 16, 2009) and E did not elect COBRA
coverage for the dental plan. E's plan may combine
information to avoid duplication, but the information should make clear
that E has the opportunity to elect COBRA for the dental
plan and that both the medical and dental plan are eligible for the
premium reduction for periods of coverage beginning on or after February
17, 2009.
Even though the plan has already provided a COBRA election notice, Individual F
should get a full general notice because F had a qualifying
event during the ARRA-required period (September 1, 2008 through December
31, 2009); F’s election notice was provided on or after
ARRA’s enactment (that is, on or after February 17, 2009); and the
notice did not contain the additional information required by ARRA. (Note:
it does not matter what type of qualifying event made F
eligible for COBRA and F’s election period remains open
until 60 days after a complete notice, including the new ARRA disclosures,
is provided.)
Individual G should get a full general notice because G
had a qualifying event during the ARRA-required period (September 1, 2008
through December 31, 2009), and has not yet received an election notice. (Note:
it does not matter what type of qualifying event made G
eligible for COBRA.) Sending the full general notice satisfies the
requirements of both 29 CFR 2590.606-4 and ARRA.
Guidance and other information is available on the Department of Labor’s
dedicated COBRA web site at www.dol.gov/COBRA. You are encouraged to
subscribe to this page so that you will receive updates as new information
is added to the site. You can also call 1.866.444.3272 to speak to an
Employee Benefits Security Administration Benefits Advisor.
For specific information about how you claim credit for the 65% of COBRA premiums and filing your Quarterly Federal Tax Return (Form 941) you should visit the
IRS web site. The IRS will continue to update its web site with more information on the ARRA premium assistance provisions as it becomes available.
For more information on continuation coverage requirements for small employers under State law (including state “mini-COBRA laws”), contact your State insurance commissioner’s office or CMS.
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