COBRA Control Services, LLC

The American Recovery and Reinvestment Act of 2009 (a.k.a. The Economic Stimulus Bill) hereafter referred to as “ARRA” will have a significant impact on COBRA.

The ARRA makes substantial, but temporary, changes to the rules governing the continuation of health coverage under COBRA and a number of other modifications affecting welfare benefit plans. BAS/CCS is working quickly to incorporate these changes into its processing, notification, billing, remittance, and reporting services.

Benefit Allocation Systems, Inc, (BAS) and Cobra Control Services, LLC (CCS) have begun to prepare to assist you with new notice, billing, and reporting requirements.

The ARRA aims to make health coverage more affordable for employees who lose their jobs by lowering the cost of COBRA coverage for many individuals. Any qualifying individual whose employment is involuntarily terminated between September 1, 2008, and December 31, 2009, and who is eligible for continuation coverage under COBRA because of the termination will be able to continue health coverage at only 35 percent of the ordinary COBRA premium for up to nine months.

Employers (and, in certain cases, insurers) will subsidize the remaining 65 percent, but have the right to recover the subsidy amount from the federal government through a credit on their payroll tax deposits.

Affected Plans. The new subsidy rules apply to plans that are subject to COBRA, certain federal government plans, and plans that are exempt from COBRA but subject to comparable requirements for health coverage continuation under state law. For convenience, this bulletin refers to the continuation of coverage under all of these plans as COBRA coverage. Health flexible spending arrangements provided through a cafeteria plan are exempt from the requirements.

Discount Period. The discount period begins with the first month of coverage after the ARRA is signed into law and lasts up to nine months, but may be shorter. The ARRA does not extend the maximum period of COBRA coverage beyond its ordinary expiration date. The discount will end when the COBRA coverage itself ends. In addition, the discount will end when an individual becomes eligible for coverage under Medicare or another group health plan (other than a plan that offers certain types of limited benefits, such as a dental plan or health flexible spending account). The ARRA applies penalties against individuals who fail to provide appropriate notice when they become eligible for other coverage.

Second Chance to Elect. Those who are eligible for the discount, but who did not previously elect COBRA coverage must be afforded a period of at least 60 days to elect continuation coverage. The coverage will be effective as of the first day of the month after the ARRA is signed into law (March 1). The maximum period for coverage will be measured from when it would have begun if COBRA had been elected when initially offered.

Notice Requirements. Plan administrators must modify or supplement the COBRA notices they provide when a qualifying event occurs. The notice must include specified information regarding the opportunity for a premium discount. Plan administrators must also alert those who have already elected COBRA and those who are eligible for the discount but have not elected COBRA, of their rights under the ARRA. This notice must be provided within 60 days after the ARRA is signed. The government is required to issue model notices within 30 days of that signature.

This posting is brought to you by Benefit Allocation Systems, Inc. and COBRA Control Services, LLC. The information contained herein is for informational purposes only and is not intended as legal advice, nor is it intended to advise you of your obligations under the American Recovery and Reinvestment Act of 2009.

Filed under: Administration, American Recovery and Reinvestment Act of 2009, COBRA, Economic Stimulus, Legislation, Notices, Regulations, Uncategorized