COBRA Subsidy Extended

December 29th, 2009

On December 19, 2009, President Obama signed legislation extending the COBRA subsidy rights created earlier this year by the American Recovery and Reinvestment Act ("ARRA"). The key COBRA subsidy provisions of the new legislation, including important dates for providing notice, are provided below.

Expanded Eligibility Period

Employees covered by a health care plan who are or were involuntarily terminated at any time from September 1, 2008 to February 28, 2010, and who are or were entitled to elect COBRA coverage because of the termination, are eligible for a 65% subsidy for COBRA premiums. Eligibility for COBRA coverage need not begin by February 28, 2010 as long as the termination occurs on or before that date.

Length of Subsidy Expanded

Individuals eligible for the subsidy (assistance eligible individuals or “AEIs”) can receive the subsidy for up to 15 months, instead of only the 9 months provided by the ARRA.

Retroactive Coverage Reinstatement

AEIs whose ARRA subsidy expired and who then stopped contributing towards COBRA continuation coverage can have coverage reinstated retroactively if they timely pay any missed premiums at the subsidized amount. The premiums must be paid in full by February 17, 2010 or 30 days after notice of the rights under the new legislation is provided by the plan administrator (see below), whichever is later. 

Premium Refund/Credit

AEIs who continued coverage after the ARRA subsidy expired and paid full premiums must be reimbursed or provided with a credit for 65% of the amount of the premium.

Notice Obligations

Plan administrators (in most cases, employers who sponsor a group health plan) must give notice of the various subsidy extension rights as follows:

  • To anyone who was or becomes an AEI on or after October 31, 2009, by no later than February 17, 2010;
  • To anyone who is involuntarily terminated on or after October 31, 2009, pursuant to the notice rules of the ARRA;
  • To anyone who is eligible to retroactively receive the subsidy or a credit or refund for the amount of premiums paid in excess of the subsidy, within 60 days of the date of the loss of the original 9-month premium subsidy.

The Department of Labor will likely issue model forms for the notices in the near future. For more information on compliance with the new subsidy rules, please contact Meg Vergeront.

Filed Under: Business Law

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