American Recovery and Reinvestment Act Resource Page
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President Barack Obama signed the American Recovery and Reinvestment Act (ARRA), commonly called the stimulus plan on February 17, 2009. The bill seeks to stimulate the economy by spending 787 billion on education, energy, health care, housing, and transportation. This resource page provides information for consumers related to state continuation, COBRA, Medicaid, and projects to protect the Gulf Coast from future hurricane damage.
Q 1. If a person elects state continuation coverage under the special election period provided for in SB 1771, what will his or her period of coverage be? A. The period of continuation coverage for an extended election eligible individual who elects continuation coverage under the special election window will begin on the first period of coverage beginning on or after the effective date of SB 1771, and it will not extend beyond the date the period of continuation coverage would have ended if the coverage had been elected during the election period as it existed before SB 1771 was enacted. SB 1771 became effective June 19, 2009. Thus, in most cases, the first period of coverage under the extended election window will begin July 1, 2009. The continuation coverage will end for the individual no later than when it would have ended had the individual initially elected state continuation of coverage when first available. If six months have already passed from the date when the individual could have first begun state continuation coverage, the individual’s time has already expired and he or she will not benefit from the extended election period under SB 1771.
Example: An individual was involuntarily terminated on September 15, 2008, was timely notified of her right to state continuation of coverage, but did not elect it. Can the individual elect now under the extended election period?
No, had the individual elected continuation of coverage at the time she was first eligible, her six months would already have expired. (This example should not be construed to alleviate any employer notice requirements under SB 1771).
Example: An individual was involuntarily terminated on February 15, 2009. If he elects state continuation of coverage under the special election window, what will his period of coverage be?
If the individual’s state continuation coverage would have begun March 1, 2009, he would have had coverage through August 31, 2009. Under SB 1771, his coverage will begin on the first period of coverage following the effective date of SB 1771 (most likely July 1, 2009) and will still end August 31, 2009. Thus, the individual will have two months of state continuation coverage, and he may be eligible under federal law for the subsidized premium for those two months.
Q 2. Does the 65/35 subsidy provided by the American Recovery and Reinvestment Act (ARRA) apply to state continuation? A. The subsidy applies to COBRA continuation coverage, including comparable state continuation coverage.
Q 3: Under the ARRA, COBRA continuation coverage is defined as continuation coverage provided pursuant to ERISA (generally for private sector employers with 20 or more employees), the Public Health Service Act (for non-federal governmental employers with 20 or more employees), Title 5 of the US Code (for federal employees) or under a state program that provides comparable continuation coverage (generally covering private employers with fewer than 20 employees). What criteria is used to determine if a state program provides comparable continuation coverage? A. According to the Centers for Medicare & Medicaid Services (CMS), in order to be considered a comparable state continuation coverage program, a State must provide individuals the general right to continue coverage substantially similar to that previously provided under the employer’s group health plan at a cost that is based on a specified percentage of the employer group health plan’s cost of providing such coverage. Individual conversion coverage or state public health programs such as Medicaid or CHIP are not considered continuation coverage. For more information, visit the CMS website at www.cms.hhs.gov/COBRAContinuationofCov/.
Q 4: Is the state continuation coverage offered in Texas considered to be comparable continuation coverage? A. Yes, as long as it provides individuals the general right to continue coverage substantially similar to that previously provided under the employer’s group health plan at a cost that is based on a specified percentage of the employer group health plan’s cost of providing such coverage.
Q 5. Does the new law, including the subsidy, apply to small employer health plans (less than 20 employees)? A. The new law, including the subsidy, applies prospectively to small employer health plans. Beneficiaries in state continuation coverage programs are not eligible for the extended election period provided under the American Recovery and Reinvestment Act (ARRA) for those who experienced an involuntary termination from September 1, 2008 through February 16, 2009. However, SB 1771, effective June 19, 2009, creates a similar extended election period for individuals in state continuation coverage programs who experienced an involuntary termination from September 1, 2008 through February 16, 2009. For the full text of this bill, visit www.legis.state.tx.us/BillLookup/Text.aspx?LegSess=81R&Bill=SB1771.
Q 6: If the small employer has never paid for dependent coverage, does the employer now have to pay the 65 percent for dependents as well as the terminated employee under the new stimulus package? A. According to CMS, a dependent of a covered employee is a qualified beneficiary under a state program eligible for the premium assistance, as long as the dependent was covered under the employer’s plan on the day before the qualifying event (a special rule applies for children born to or adopted by a covered employee during a period of COBRA continuation coverage). Therefore, whether the small employer has paid for dependent coverage in the past is not a factor in determining if a dependent is eligible for premium assistance. For more information, visit the CMS website at www.cms.hhs.gov/COBRAContinuationofCov/.
Q 7. Has the period of time provided (six months) for those persons who elect state continuation been changed? A. ARRA does not change the length of time that group continuation coverage must be provided to eligible individuals, but recent state legislation (SB 1771) lengthens the time period for state continuation coverage prospectively from six months to nine months for individuals who are not eligible for federal COBRA coverage. However, if the individual is eligible for federal COBRA coverage, the state continuation coverage is still only available for six months. In the case of individuals electing COBRA coverage, the six-month state continuation period begins after the COBRA continuation coverage period ends.
Q 8. If a person eligible for state continuation is offered coverage and declined it before the ARRA was effective, would they be offered a special enrollment to elect state continuation? A. Yes, individuals who were eligible for state continuation coverage and declined coverage or failed to elect within the required time period will be offered a special enrollment period to elect state continuation coverage under the recently passed SB 1771 (effective June 19, 2009). This bill provides for an extended election period for individuals:
who became eligible for state continuation coverage due to involuntary termination (other than for cause) between September 1, 2008 and February 16, 2009
who did not elect such coverage or whose state continuation coverage lapsed or was canceled without reinstatement for a reason other than exhaustion of the maximum period of state continuation coverage allowable under law
whose involuntary termination on which the eligibility is based occurred during that same period
Q 9. How have the state continuation notification requirements been affected by ARRA? Is the employer and/or insurer required to notify the eligible person; does ARRA prescribe a certain form to be used and where can it be obtained? A. ARRA mandates that insurance issuers notify certain current and former participants and beneficiaries about the premium reduction. The Department of Labor created model notices to help insurance issuers comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions. These model notices can be obtained at www.dol.gov/ebsa/COBRAmodelnotice.html. Additionally, SB 1771 requires employers or group policy or contract holders to provide notice to any former employee, member, dependent, or enrollee who is an extended election eligible individual as defined by the bill. The notice requirements are set forth in the statute and must be made within 60 days of the effective date of SB 1771 (effective June 19, 2009). For the full text of this bill, visit www.legis.state.tx.us/BillLookup/Text.aspx?LegSess=81R&Bill=SB1771.
Q 10. In the case of an insured plan subject solely to state law requiring the insurer to provide continuation coverage, if the employer collects the reduced premiums from assistance eligible individuals and pays the full premium to the insurer, is the employer eligible to take the payroll credit directly? A. No. Under section 6432(b)(3), in the case of an insured plan subject solely to state law with respect to the requirement to provide continuation coverage, the only person entitled to be reimbursed for the premium reduction through the payroll credit (unless and until provided otherwise in future guidance) is the insurer providing the coverage under the group health plan.
Q 11. An insured is laid off from work after being on a group health insurance plan for two months. The insured then elects COBRA continuation for 18 months. Would the insured be eligible for the six months of state continuation? Do the months on COBRA count in order to satisfy the Texas Insurance Code (TIC) eligibility requirement that “the individual has been continuously insured under the group policy, or under any group policy providing similar benefits that the policy replaces, for at least three consecutive months immediately before termination?” A. Yes, the COBRA continuation coverage would count toward the three month requirement. TIC §1251.252 contains the “three consecutive months immediately before termination” language. TIC §1271.301 is the similar provision relating to continuation of coverage requirements for health maintenance organizations. The statutory language does not require the insured to be covered for three consecutive months under the plan while still employed; rather, it requires the insured to be covered for three consecutive months before termination of coverage.
Q 12. If a person has only been on the current plan one month but had prior eligible group coverage and had no gaps in coverage, can the prior coverage count toward eligibility for state continuation?
Example: Plan member is currently on plan (B) for one month and gets laid off. She was on another group plan (A) with a different employer for 12 months prior to being on plan B.
Q 13. Can the coverage on plan A be used to qualify for state continuation? A. No, the coverage under plan A cannot be used. TIC §1251.252 states that an employee, member or dependent is entitled to continuation of group coverage if, in relevant part, the individual “has been continuously insured under the group policy, or under any group policy providing similar benefits that the policy replaces, for at least three consecutive months immediately before termination.” TIC §1271.301 contains a similar requirement for enrollees of a health maintenance organization. Coverage under another group plan with a different employer would not be considered “any group policy providing similar benefits that the policy replaces,” and therefore the three month requirement would not be met.
Q 14. If a person has been on the current plan for less than three consecutive months immediately before termination, can coverage under a previous group plan with the same employer satisfy the state continuation eligibility requirement?
Example: Plan member is on the plan (A) for two months (example: November and December 2008). This plan is replaced on January 1, 2009 by another insurer (plan B). Different plan, same employer. The member has the coverage on plan B and at the end of January he or she is terminated. The individual had the coverage on Plan B for 1 month.
Q 15: Can coverage under plans A and B (three months total) be used to qualify for state continuation or just coverage under plan B (one month total) since that is the plan the member had when terminated? A. Yes, coverage under plans A and B can be used to qualify for state continuation. TIC §1251.252(a)(2) states that, for an individual to be entitled to continuation of group coverage, the individual must, in relevant part, have been “continuously insured under the group policy, or under any group policy providing similar benefits that the policy replaces, for at least three consecutive months immediately before termination.” Similarly, TIC §1271.301 states that, for an individual to be entitled to continuation of group coverage, the individual must, in relevant part, have for at least three consecutive months “been continuously covered under the group contract and under any previous group contract providing similar services and benefits that the group contract replaced.” Thus, the previous group plan or contract, as long as it provided similar benefits to those of the new group plan or contract, would count toward the three month requirement.
Q 16. Are employees of a nonprofit organization ever eligible for state continuation coverage? If the answer is sometimes, when are they not eligible? A. It depends on the facts. If the employees of the non-profit organization are covered under (a) a fully insured group policy that provides coverage for hospital, surgical or major medical expenses on an expense incurred basis or (b) a group contract under a health maintenance organization, then continuation of coverage must be provided to those who meet the qualifications and elect continuation pursuant to Chapters 1251 and 1271 of the TIC. However, if the non-profit organization is exempt from the Texas Insurance Code by statute, the state continuation requirements would not apply. For example, Texas Business Organizations Code § 22.409 provides that the Insurance Code does not apply to a church benefits board or a program, plan, benefit, or activity of the board or a person affiliated with the board.
Q 17. The code mentions that a person can be eligible for state continuation if coverage ceases provided coverage is terminated for any reason except involuntary termination for cause (ITFC). What is ITFC? Can you provide some examples? A. TIC § 1251.252(b) and §1271.301(a) state that “involuntary termination for cause” does not include termination for any health-related reason. However, there are no statutory examples of what ITFC includes. Whether an employee has been involuntarily terminated for cause depends on various facts and circumstances. Because there are no specific statutory examples, determination of ITFC is a case-by-case analysis.
Q 18. An eligible dependent has elected state continuation and while in the third month of the six-month coverage period he or she gets married. Does the individual’s state continuation terminate immediately because he or she was married or does the continuation coverage period last until six months have elapsed? A. It depends on the facts. Marriage is not a reason for termination of state continuation coverage. Under TIC§1251.255(a)(6), if the insured becomes eligible for similar benefits, continuation coverage would be terminated. Under TIC §1271.304(3), if an enrollee is covered for similar services and benefits, continuation coverage would be terminated. Therefore, if an eligible dependent became eligible or covered, as applicable, under the new spouse’s plan and that plan provided similar coverage, then the continuation coverage could terminate. The marriage itself would not cause termination of continuation coverage, but meeting the criteria for TIC §1251.255(a)(6) or §1271.304(3), as applicable, would.
Q 19. If an insured, during a period of state continuation coverage, is married, has a child, or adopts a child, is the new spouse or child eligible to elect coverage as a dependent of the insured? A. No, TIC §1251.252 requires a dependent to be “continuously insured under the group policy, or under any group policy providing similar benefits that the policy replaces, for at least three consecutive months immediately before termination” to be eligible for state continuation of coverage. TIC §1271.301 is the similar provision relating to continuation of coverage requirements for health maintenance organizations. An individual who becomes a dependent of an insured after state continuation coverage commences has not been continuously covered for any amount of time.
ARRA’s applicability to state and COBRA continuation
The new law provides a subsidy that may reduce by 65 percent the cost of COBRA and comparable state group continuation coverage for workers who lose their jobs.
Q 20. What are group coverage continuation laws? A. Group coverage continuation laws require employers to offer employees who lose group coverage the opportunity to continue their employer-based health insurance. COBRA is the federal law that requires employers with 20 or more employees to provide group continuation coverage. State law requires employers of any size and associations to provide group continuation coverage to their employees, dependents, members, or enrollees under Chapter 1251, Subchapters F and G, and Chapter 1271, Subchapter G, Insurance Code.
Q 21. When an employee loses group coverage and elects continuation, who pays the premium? A. Normally the employee who lost group coverage, not the employer, must pay the entire health insurance premium.
Q 22. Who is eligible for subsidized coverage under the stimulus plan? A. Individuals who lose group health coverage because of an involuntarily termination, other than a termination of employment for gross misconduct (“former employees”), between September 1, 2008 and December 31, 2009 are eligible for a 65 percent federal subsidy of their COBRA or state continuation coverage premiums for up to nine months. This subsidy is not available to workers whose modified adjusted gross income in the year they receive the subsidy exceeds 145,000 for individuals and 290,000 for couples filing joint tax returns. We encourage individuals and couples to confirm eligibility with a tax specialist.
NOTE: The subsidy will be phased out for individuals whose modified adjusted gross income is between 125,000 and 145,000 and for couples between 250,000 and 290,000. If an individual takes advantage of the subsidy and in the same year exceeds the income limit, he or she must repay the subsidy.
Q 23. How do individuals sign up for the subsidy? A. Employers are required to send forms to former employees so that former employees can elect to continue their group coverage and receive the subsidy. Former employees will have 60 days after receiving the forms to enroll. Further details about enrollment will be provided by the federal Department of Labor. For the most up-to-date information, contact the Department of Labor at 1-866-444-3272 or visit the agency’s website at www.dol.gov/ebsa/COBRA.html.
Q 24. Does the new law, including the subsidy, apply to group continuation coverage other than COBRA? A. The new law, including the subsidy, applies to both federal COBRA group continuation coverage and prospectively to comparable state group continuation coverage. Beneficiaries in State continuation coverage programs are not eligible for the extended election period provided under the ARRA for those who experienced an involuntary termination from September 1, 2008 through February 16, 2009. However, SB 1771, effective June 19, 2009, creates a similar extended election period for individuals who are eligible for state continuation coverage and who experienced an involuntary termination from September 1, 2008 through February 16, 2009. For the full text of this bill, visit www.legis.state.tx.us/BillLookup/Text.aspx?LegSess=81R&Bill=SB1771.
Q 25. When will eligible individuals first receive the subsidy? A. The subsidy will be applied to premiums for the first period of coverage beginning on or after February 17, 2009. For most individuals, the first period of subsidy-eligible coverage will begin March 1, 2009. The subsidy is prospective (i.e., the new law does not subsidize group continuation coverage prior to the first period of coverage on or after February 17, 2009).
NOTE: Individuals who have already paid premiums for a period of coverage to which the subsidy applies are entitled to a refund or credit from their employer or insurer for the subsidy amount.
Q 26. How will the subsidy be applied to group continuation coverage? A. Former employees who qualify for the subsidy will only be required to pay 35 percent of the group coverage continuation premium. The remaining 65 percent will initially be paid by the former employer, in the case of self-insured plans, or by the insurer providing coverage under the group health plan. The former employer or the insurer will then be reimbursed by the federal government through a reduction in payroll taxes. For more information on the reduction in payroll taxes, visit the IRS's COBRA web page at www.irs.gov/newsroom/article/0,,id=204505,00.html.
Q 27. Will eligible individuals who previously terminated or declined to elect group continuation coverage have another opportunity to elect group continuation coverage and receive the subsidy? A.For federal COBRA continuation: If your employment was involuntarily terminated on or after September 1, 2008 and you initially declined to elect federal COBRA continuation coverage, or elected federal COBRA continuation coverage and later stopped paying premiums, your employer must notify you of an additional opportunity to elect federal COBRA continuation coverage and receive the subsidy. You will have 60 days to enroll after receiving notification from your employer. This opportunity to enroll is referred to as the “extended election period.” Coverage for eligible individuals who enroll during the extended election period under ARRA will:
Begin with the first period of coverage on or after February 17, 2009.
End on the date coverage would have ended if the eligible individual had elected group continuation coverage when he or she first became eligible. For example, if an employee was involuntarily terminated September 1, 2008, did not elect COBRA continuation coverage after the layoff, but now chooses to elect COBRA, his or her COBRA coverage ends on March 1, 2010, 18 months from when he or she first became eligible for COBRA, not 18 months from the election made during the extended election period.
For state continuation: Individuals who were eligible for state continuation coverage and declined coverage or failed to elect within the required time period will be offered a special enrollment period to elect state continuation coverage under the recently passed SB 1771 (effective June 19, 2009). This bill provides for an extended election period for individuals:
who became eligible for continuation coverage due to involuntary termination (other than for cause) between September 1, 2008 and February 16, 2009;
who did not elect such coverage or whose continuation coverage lapsed or was canceled without reinstatement for a reason other than exhaustion of the maximum period of continuation coverage allowable under law; and
whose involuntary termination on which the eligibility is based occurred during that same period.
Coverage for eligible individuals who enroll during the state extended election period will:
Begin with the first period of coverage beginning on or after the effective date of SB 1771.
End on the date the period of continuation coverage would have ended if the coverage had been elected during the normal election period.
When providing coverage to former employees who elect group continuation coverage during the extended election period under ARRA or state law, employers may not apply pre-existing condition coverage limitations based on a gap in coverage between the layoff and commencement of the group continuation coverage.
Q 28. What if an employer refuses to provide group continuation coverage or refuses to provide the subsidy? A. Under ARRA, if your health plan finds that you are not eligible for the premium reduction, you can ask for an expedited review of that decision from the Secretary of the Department of Labor or the Secretary of the Department of Health and Human Services. The secretary is required to make a determination regarding your appeal within 15 business days after receiving your request for review. The Department of Labor will handle appeals related to private sector employer plans that are subject to ERISA’s COBRA provisions. CMS will handle appeals for federal, state, and local governmental employees, as well as appeals related to state mini-COBRA plans. If you have additional questions about these reviews for ERISA plans, contact the Department of Labor at 1-866-444-3272 or visit the agency’s website at www.dol.gov/ebsa/COBRA.html. If you have additional questions about these reviews for state mini-COBRA and government plans, contact CMS at NewCobraRights@cms.hhs.gov.
Q 29. Does the new law extend the length of available group continuation coverage? A. ARRA does not change the length of time that group continuation coverage must be provided to eligible individuals: COBRA typically provides for up to 18 months of coverage. However, SB 1771, effective June 19, 2009, lengthens the period of state continuation for individuals ineligible for COBRA, from a period of six months to nine months. For individuals eligible for COBRA continuation, the individual is still only eligible for six months of state continuation (the six-month state continuation period begins after the COBRA continuation coverage period ends).
Q 30. Will individuals be eligible for the subsidy for as long as they are eligible for group continuation coverage? A. The subsidy will not necessarily last as long as your group continuation coverage. For example, former employees typically qualify for up to 18 months of COBRA coverage. The subsidy lasts up to nine months. Therefore, an eligible individual who chooses to pay for 18 months of COBRA coverage after March 1, 2009 would still have to pay nine months of unsubsidized premiums.
Q 31. Can an individual lose eligibility for the group continuation subsidy? A. You can lose eligibility for the group continuation subsidy in three ways. First, as mentioned above, the subsidy lasts no longer than 9 months. Second, if your modified adjusted gross income in the year you receive the subsidy exceeds 145,000 as an individual or 290,000 as a couple filing a joint tax return, you become ineligible for the subsidy, as discussed above. Third, you become ineligible for the subsidy when you become eligible for new group health coverage or Medicare.
Beneficiaries must notify their former employer when they become eligible for new group health coverage.
Beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110 percent of the subsidy to the federal government. No such penalty shall be imposed if the beneficiary demonstrates “reasonable cause” for the failure.
NOTE: Rules governing eligibility for subsidized COBRA differ from rules governing eligibility for unsubsidized COBRA. Eligibility for unsubsidized COBRA ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the COBRA subsidy.
Q 32. Does the subsidy affect eligibility for other income-based government programs? A. The subsidy will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program.
Q 33. Does the new law affect individuals who qualify for COBRA due to eligibility for trade adjustment assistance or eligibility for benefits from the pension benefit guaranty corporation? A. The new law provides significant extensions of COBRA coverage periods for individuals who receive benefits directly from the Pension Benefit Guaranty Corporation or are eligible for Trade Adjustment Assistance. If you have additional questions about these extensions, contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website at www.dol.gov/ebsa/COBRA.html.
Medicaid Funding
The American Recovery and Reinvestment Bill allocates 15 billion -- 952 million for Texas -- in Federal Medical Assistance Percentage funding (FMAP) for Medicaid. The temporary increase in funding will be released to states February 25 in a special account they can use to draw funds as needed. States will still need to meet Medicaid eligibility requirements to receive the new funding.
FMAP is the federal match program for Medicaid, the state/federal health insurance program for people with low-income. Prior to the temporary increase, the federal government paid 60 cents for every dollar the state spent on Medicaid for the 3 million Texans enrolled.
Coastal Restoration
The General Land Office is seeking 181 million from funds provided under the American Recovery and Reinvestment Bill for projects along the Gulf Coast intended to protect seaside communities from future storm damage. Four projects will consume the bulk of the money for beach nourishment and dune restoration. Hurricane Ike touched down in Galveston County on September 13, 2008, and caused significant damage to homes, businesses, and beaches. The low dunes combined with high surge levels caused a great amount of erosion during the storm's landfall that made infrastructure vulnerable to damage.
The planned projects are as follows:
83 million for dune restoration and beach nourishment on 12 miles of West Galveston Island from 61st Street to Point San Luis subdivision
19 million for dune restoration and beach nourishment on Village of Surfside Beach near Freeport
22 million for dune restoration and beach nourishment in Quintana in Brazoria County
52.7 million for a beach rebuilding project on 21 miles of eastern Galveston County from Bolivar Peninsula to High Island
5 million for the Rollover Pass closure project. The project will close the pass that is 18 mile northeast of Galveston Bay. This will allow the construction of a permanent highway.
For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website
1-800-252-3439 463-6515 in Austin
File an Insurance Complaint
TDI accepts and reviews written complaints against insurance companies, HMOs, insurance agents, adjusters, and fully insured or fully funded health benefit plans (health plans purchased by an employer from an insurance company or HMO).
For information on filing an insurance-related complaint, visit our website or call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday.
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