COBRA-ARRA Subsidy Extension

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cobra

COBRA allows eligible individuals to continue employer-provided group health coverage for a specified time period due to certain qualifying events, such as job loss. In February 2009, the American Recovery and Reinvestment Act of 2009 (ARRA) was enacted and provided a temporary 65% COBRA (or similar state continuation coverage) premium subsidy for eligible individuals.  In December 2009, President Obama signed the Department of Defense Appropriations Act (DDAA) which also amended the ARRA.

For individuals who were involuntarily terminated from employment (and for eligible family members), the DDAA:

  • Extended the eligibility period to qualify for the COBRA subsidy,
  • Increased the subsidy duration period, and
  • Established new notice requirements.

Extended Eligibility Period
Under the ARRA, the current COBRA program provides a nine-month subsidy for COBRA-eligible individuals who experienced involuntarily employment termination and, as a result, who lost coverage on or after September 1, 2008 through December 31, 2009.

However, under the DDAA, the COBRA subsidy has been extended to 15 months for COBRA-eligible individuals who experienced involuntarily employment termination on or after September 1, 2008 through February 28, 2010.

Retroactive Subsidy Extension
Employers must allow an individual who lost the subsidized COBRA coverage when the subsidy expired to reactivate coverage by retroactively paying the COBRA premiums.  These individuals are considered eligible for the extension if they pay the reduced premium amount for the entire period since the lapse of their COBRA coverage by February 17, 2010 or, if later, 30 days after they receive proper notice of their new rights under the law.

For individuals who paid for the full premiums following the lapse, employers generally must either make a reimbursement payment equal to the excess portion paid or credit that amount toward future premiums payable.

New Notice Requirements
Certain current and former participants and beneficiaries must be notified about the current premium reduction provisions. For more information about the new notice requirements, please review the information in the Tool of the Month in this newsletter.

Note: COBRA may be extended yet again (to June 30, 2010) due to the proposed Jobs for Main Street Act on which Congress is currently debating.