United States: Congress Extends COBRA Subsidy

Originally published January 2010

Just in time for the year-end holidays, Congress enacted the Department of Defense Appropriations Act, 2010 (the "2010 Act") tucked into which is an extension of the COBRA subsidy that was set to expire on December 31, 2009. The new law:

  • Extends eligibility for the COBRA subsidy to employment terminations that occur through February 28, 2010 – a two month extension;
  • Extends the premium reimbursement period from 9 months to 15 months and is retroactive to March 1, 2009; and
  • Allows those who stopped paying COBRA coverage because their subsidy ran out to re-enroll for COBRA coverage without any gaps in coverage.

COBRA Prior To The American Recovery And Reinvestment Act

COBRA generally applies to all group health plans maintained by private-sector employers having 20 or more employees and by state and local governments. COBRA generally requires continuation coverage of 18 months – and 36 months if the covered employee is disabled – to be offered to covered employees, their spouses, their former spouses and their dependent children, when group health coverage otherwise would be lost by the occurrence of certain events. One of these events is the termination (or a reduction in hours) of a covered employee's employment for reasons other than gross misconduct. Employers may and generally do require persons who lose their job and elect COBRA continuation coverage to pay the full cost of that coverage, plus a 2% administrative charge. Thus, employees electing COBRA continuation coverage could be required to pay up to 102% of the COBRA continuation premiums to retain health insurance.

The ARRA As Amended

Certain terminated employees were afforded COBRA premium assistance under the February 2009 American Recovery and Reinvestment Act (the "ARRA"). The ARRA, as amended by the 2010 Act, provides for COBRA premium assistance of 65% of premium cost to employees who lost or lose their job (other than for gross misconduct) between September 1, 2008 and February 28, 2010 and elect COBRA continuation coverage ("Assistance Eligible Individuals").

Assistance Eligible Individuals are entitled to the 65% subsidy for up to 15 months, or until they become eligible for (as opposed to covered under) other group health coverage or Medicare benefits. For this purpose, "other group health coverage" does not include: (i) coverage consisting only of dental, vision, counseling or referral services (or a combination); (ii) treatment furnished at the employer's on-site medical facility that is primarily first-aid, prevention or wellness care (or a combination); or (iii) coverage under a Health Reimbursement Arrangement or a Health Flexible Spending Arrangement.

Generally, premium subsidies are excludable from gross income of Assistance Eligible Individuals; however, those who generally earn more than $145,000 ($290,000 for joint returns) must report as income the full amount of the subsidy, and those who earn between $125,000 and $144,999 (or, more than $250,000 but less than $289,999 for joint returns) must report as income a percentage of the subsidy received in that year.

COBRA continuation coverage may expire upon the first to occur of:

  • Failure to timely pay premiums in full;
  • Cessation of the employer's maintenance of any group health plan;
  • Commencement of coverage under another group health plan of a qualified beneficiary after electing COBRA continuation coverage; or
  • Entitlement of a qualified beneficiary to Medicare benefits after electing continuation coverage.

The 2010 Act

Under the 2010 Act, Assistance Eligible Individuals who had reached the end of the premium subsidy period before this legislation extended it to 15 months will have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay their 35% of premium costs by February 17, 2010, or, if later, within 30 days after notice of the extension is provided by their plan administrator. Individuals who lost their subsidy and paid the full 100% premium in December 2009 should contact their plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the overpayment.

Actions Required Of Employers

The ARRA, as amended by the 2010 Act, requires that plan administrators provide certain notices. As part of the COBRA election notice, plan administrators must provide information about the premium reduction to all employees who have COBRA qualifying events from September 1, 2008 through February 28, 2010.

Plan administrators must also provide notice of the changes made to the premium reduction provisions of ARRA by the 2010 Act to those who already have been provided a COBRA election notice (unless the election notice included the updated premium reduction information).

  • Assistance Eligible Individuals must be provided this notice by February 17, 2010;
  • Assistance Eligible Individuals who are in a "transition period" must be provided this notice within 60 days of the first day of the transition period. The transition period is the period that began immediately at the end of the 9-month premium subsidy period in effect under ARRA before the 2010 Act amendment, provided the 9-month period ended before December 19, 2009 for those individuals who are eligible for an extension of the premium subsidy for an additional 6 months; and
  • Those who experience a termination of employment on or after October 31, 2009 and lose health coverage must be provided this notice within the normal timeframes for providing continuation coverage notices.

While we counsel our clients on COBRA related issues as a matter of course, every client is unique and solutions must be specifically tailored. We look forward to the opportunity to assist with the new aspects of COBRA.

www.schnader.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions