The Temporary Extension Act extends the COBRA subsidy program that was enacted under the American Recovery and Reinvestment Act.

The law’s COBRA provisions:

• Extend the eligibility period for the 15-month 65 percent premium subsidy to those involuntarily terminated from March 1 through March 31, 2010.

• Allow employees to receive the subsidy if they first lost group coverage due to a reduction in hours and then were terminated after enactment of the bill.

The information contained herein is for informational purposes only and is not intended as legal or tax advice, nor is it intended to advise you of your obligations under ERISA, COBRA, HIPAA or the American Recovery and Reinvestment Act of 2009. It should not be used or relied upon as the basis for any action or choosing inaction. Consult an experienced benefits attorney or tax professional about your specific situation before deciding on any course of action or inaction.

The Act makes clear that the qualifying event (involuntarily termination other than for gross misconduct or reduction in hours, which causes a loss of coverage) must occur before February 28, 2010.

Last week the House of Representatives just approved a bill that extends the ARRA COBRA premium subsidy for involuntary terminations of employment that occur through 3/31 and addresses the situation where a reduction of hours is followed by an involuntary termination of employment. We will watch to see what the Senate does. Remember, just because the House of Representatives approves a bill does not make it law; it has further to go!

The information contained herein is for informational purposes only and is not intended as legal or tax advice, nor is it intended to advise you of your obligations under ERISA, COBRA, HIPAA or the American Recovery and Reinvestment Act of 2009. It should not be used or relied upon as the basis for any action or choosing inaction. Consult an experienced benefits attorney or tax professional about your specific situation before deciding on any course of action or inaction.

(b) Extension of Maximum Duration of Assistance.—Subsection (a)(2)(A)(ii)(I) of such section is amended by striking “9 months” and inserting “15 months”.

(c) Rules Related to 2009 Extension.—Subsection (a) of such section is further amended by adding at the end the following:

“(16) Rules Related to 2009 Extension.—

“(A) Election to pay Premiums Retroactively and Maintain COBRA Coverage.—In the case of any premium for a period of coverage during an assistance eligible individual’s transition period, such individual shall be treated for purposes of any COBRA continuation provision as having timely paid the amount of such premium if—

“(i) such individual was covered under the COBRA continuation coverage to which such premium relates for the period of coverage immediately preceding such transition period, and

“(ii) such individual pays, not later than 60 days after the date of the enactment of this paragraph (or, if later, 30 days after the date of provision of the notification required under subparagraph (D)(ii)), the amount of such premium, after the application of paragraph (1)(A).

“(B) Refunds and Credits for Retroactive Premium Assistance Eligibility.—In the case of an assistance eligible individual who pays, with respect to any period of COBRA continuation coverage during such individual’s transition period, the premium amount for such coverage without regard to paragraph (1)(A), rules similar to the rules of paragraph (12)(E) shall apply.

“(C) Transition Period.—

“(i) In General.—For purposes of this paragraph, the term ‘transition period’ means, with respect to any assistance eligible individual, any period of coverage if—

“(I) such period begins before the date of the enactment of this paragraph, and

“(II) paragraph (1)(A) applies to such period by reason of the amendment made by section 1010(b) of the Department of Defense Appropriations Act, 2010.

“(ii) Construction.—Any period during the period described in subclauses (I) and (II) of clause (i) for which the applicable premium has been paid pursuant to subparagraph (A) shall be treated as a period of coverage referred to in such paragraph, irrespective of any failure to timely pay the applicable premium (other than pursuant to subparagraph (A)) for such period.

“(D) Notification.—

“(i) In General.—In the case of an individual who was an assistance eligible individual at any time on or after October 31, 2009, or experiences a qualifying event (consisting of termination of employment) relating to COBRA continuation coverage on or after such date, the administrator of the group health plan (or other entity) involved shall provide an additional notification with information regarding the amendments made by section 1010 of the Department of Defense Appropriations Act, 2010, within 60 days after the date of the enactment of such Act or, in the case of a qualifying event occurring after such date of enactment, consistent with the timing of notifications under paragraph (7)(A).

“(ii) To Individuals Who Lost Assistance.—In the case of an assistance eligible individual described in subparagraph (A)(i) who did not timely pay the premium for any period of coverage during such individual’s transition period or paid the premium for such period without regard to paragraph (1)(A), the administrator of the group health plan (or other entity) involved shall provide to such individual, within the first 60 days of such individual’s transition period, an additional notification with information regarding the amendments made by section 1010 of the Department of Defense Appropriations Act, 2010, including information on the ability under subparagraph (A) to make retroactive premium payments with respect to the transition period of the individual in order to maintain COBRA continuation coverage.

“(iii) Application of Rules.—Rules similar to the rules of paragraph (7) shall apply with respect to notifications under this subparagraph”.

(d) Clarification that Eligibility and Notice is Based on Timing of Qualifying Event.—Subsection (a) of such section is amended—

(1) in paragraph (3)(A)—

(A) by striking “at any time” and inserting “such qualified beneficiary is eligible for COBRA continuation coverage related to a qualifying event occurring”; and

(B) by striking “, such qualified beneficiary is eligible for COBRA continuation coverage”; and

(2) in paragraph (7)(A), by striking “become entitled to elect COBRA continuation coverage” and inserting “have a qualifying event relating to COBRA continuation coverage”.

(e) Effective Date.—The amendments made by this section shall take effect as if included in the provisions of section 3001 of division B of the American Recovery and Reinvestment Act of 2009 to which they relate.

(f) Emergency Designations.—

(1) In General.—Amounts in this section are designated as emergency requirements and necessary to meet emergency needs pursuant to sections 403 and 423(b) of S. Con. Res. 13 (111th Congress), the concurrent resolution on the budget for fiscal year 2010.

(2) PAYGO.—All applicable provisions in this section are designated as an emergency for purposes of pay-as-you-go principles.

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 (2010 DOD Act) provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee’s employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

What is COBRA?

COBRA gives workers and their families who lose their health benefits the right to purchase group health coverage provided by the plan under certain circumstances.

If the employer continues to offer a group health plan, the employee and his/her family can retain their group health coverage for up to 18 months by paying group rates. The COBRA premium may be higher than what the individual was paying while employed but generally the cost is lower than that for private, individual health insurance coverage.

The plan administrator must notify affected employees of their right to elect COBRA. The employee and his/her family each have 60 days to elect the COBRA coverage; otherwise, they lose all rights to COBRA benefits.

COBRA generally does not apply to plans sponsored by employers with fewer than 20 employees. Many States have similar requirements for insurance companies that provide coverage to small employers. The premium reduction is available for insurers covered by these State laws.

Changes Regarding COBRA Continuation Coverage Under ARRA, as amended by the 2010 DOD Act

The 2010 DOD Act extended the COBRA premium reduction eligibility period for two months until February 28, 2010 and increased the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).

In addition, individuals who had reached the end of the reduced premium period before the 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 the 35 percent of premium costs by February 17, 2010, or, if later, 30 days after notice of the extension is provided by their plan administrator.

Individuals who lost their subsidy and paid the full 100 percent 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.

Eligibility for the Premium Reduction: The premium reduction for COBRA continuation coverage is available to “assistance eligible individuals”.

An “assistance eligible individual” is the employee or a member of his/her family who:

• has a qualifying event for continuation coverage under COBRA or a State law that provides comparable continuation coverage (for example, so-called “mini-COBRA” laws) that is the employee’s involuntary termination at any point from September 1, 2008 through February 28, 2010; and
• elects COBRA coverage timely.

Those who are eligible for other group health coverage (such as a spouse’s plan) or Medicare are not eligible for the premium reduction. There is no premium reduction for premiums paid for periods of coverage that began prior to February 17, 2009.

Assistance eligible individuals who pay 35 percent of their COBRA premium are treated as having paid the full amount. The premium reduction (65 percent of the full premium) is reimbursable to the employer, insurer or health plan as a credit against certain employment taxes.

Period of Coverage

The premium reduction applies to periods of coverage beginning on or after February 17, 2009. A period of coverage is a month or shorter period for which the plan charges a COBRA premium. The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 15 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare.

Notice Requirements

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

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

• Individuals who are “assistance eligible individuals” must be provided this notice by February 17, 2010;
• Individuals 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; and
• Individuals who are in a “transition period” (a period that begins immediately after the end of the nine months of premium reduction in effect under ARRA before the amendments made by the 2010 DOD Act, as long as those nine months ended before December 19, 2009 and the premium reduction provisions of the 2010 DOD Act would apply due to the extension from nine to 15 months) must be provided this notice within 60 days of the first day of the transition period.

Expedited Review of Denials of Premium Reduction: Individuals who are denied treatment as assistance eligible individuals and thus are denied eligibility for the premium reduction (whether by their plan, employer or insurer) may request an expedited review of the denial by the U.S. Department of Labor. The Department must make a determination within 15 business days of receipt of a completed request for review. The official application form is available at www.dol.gov/COBRA and can be filed online or submitted by fax or mail.

Switching Benefit Options: If an employer offers additional coverage options to active employees, the employer may (but is not required to) allow assistance eligible individuals to switch the coverage options they had when they became eligible for COBRA. To retain eligibility for the ARRA premium reduction, the different coverage must have the same or lower premiums as the individual’s original coverage. The different coverage cannot be coverage that provides only dental, vision, a health flexible spending account, or coverage for treatment that is furnished in an on-site facility maintained by the employer.

Income limits: If an individual’s modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium reduction during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium reduction that must be repaid is reduced proportionately. Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits. If you think that your income may exceed the amounts above, consult your tax preparer or contact the IRS at www.irs.gov.

This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; TTY: 202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.

Release Date: December 21, 2009
Contact Name: Gloria Della or Joseph De Wolk
Phone Number: 202.725.8422/202.579.4681

Statement of Phyllis C. Borzi on COBRA subsidy extension

Washington, DC – Phyllis C. Borzi, Assistant Secretary of the Employee Benefits Security Administration (EBSA) today released the following statement regarding the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the recent extension of the premium reduction under the COBRA subsidy:

“I am pleased Congress has acted and the President has signed the Fiscal Year 2010 Defense Appropriations Act. The act extends the eligibility period for the COBRA premium reduction for an additional two months (through Feb. 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). Millions of unemployed Americans and their families will be better able to afford and keep their health benefit coverage because of this new law.

“Individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by (60 days after date of enactment) or, if later, 30 days after notice of the extension is provided by their plan administrator.

“We encourage you to subscribe to our COBRA Web site, www.dol.gov/cobra, to get information on new notice requirements, updated guidance, fact sheets, and frequently asked questions as they become available.

“Individuals should contact their plan or health insurance provider for information regarding the extension under their health plan. If you need further assistance contact an EBSA Benefits Advisor toll-free at 1-866-444-3272.”

U.S. Department of Labor news releases are accessible on the Department’s Newsroom page. The information in this news release will be made available in alternate format (large print, Braille, audio tape or disc) from the COAST office upon request. Please specify which news release when placing your request at 202.693.7828 or TTY 202.693.7755. The Labor Department is committed to providing America’s employers and employees with easy access to understandable information on how to comply with its laws and regulations. For more information, please visit the Department’s Compliance Assistance page.

Specifically, H.R. 3930 would extend the ARRA COBRA subsidy eligibility to those who are involuntarily terminated between January 1 and June 30, 2010 and extend the maximum period of assistance to 15 months. 

H.R. 3930 also includes a six-month extension of COBRA coverage. For individuals who are eligible for COBRA as a consequence of termination (or reduction in hours) of employment “occurring on or after April 1, 2008 and before January 1, 2010, if the maximum required period of COBRA continuation coverage is 18 months, such period is extended to 24 months.”  The Council is seeking clarification of this legislative language, however, as the time frame for eligibility for this six month extension is inconsistent with timeframes that appear in the introduction to the bill and other section headings. 

This measure could be included as part of comprehensive health care reform legislation, currently pending in both chambers of Congress or in legislation extending unemployment benefits and other expiring provisions of the stimulus legislation. H.R. 3200, the Affordable Health Care for America Act in the House already includes a provision extending the duration of COBRA coverage.

Q     
Who is covered under
Mini-COBRA?

A      
Those covered under
Mini-CORBA include former employees and eligible dependents who were
continuously insured under their group policy for an entire three-month period
ending with the employee’s termination.

Q   Who is not available for continuation coverage
under Mini-COBRA?

A   Mini-COBRA coverage is not available
for:

§ 
anyone covered under the
policy who is covered by, or is eligible for coverage under Medicare;

§ 
anyone who fails to verify
that he or she is ineligible for employer-based group health insurance as an
eligible dependent;

§ 
anyone who is a member of an
Individual medical plan, self-insured plan, or stand-alone dental plan;

§ 
anyone who is or could be
covered by any other insured or uninsured group health coverage arrangement and
under which the person was not covered immediately prior to such termination
(excluding Medical Assistance, CHIP, and adultBasic);

§ 
a group that is no longer a
viable business.

Q     
What benefits will be available under the continuation
plan?

A      
The same hospital, surgical,
or major medical benefits provided to everyone else under the plan.

Q     
When will continuation coverage start?

A      
Coverage will start on the
date of the qualifying event.

Q     
When will continuation coverage end?

A      
Coverage will terminate when
the former employee or eligible dependent is no longer eligible for the coverage
(see eligibility list above), or the first of the following triggering events:

§ 
nine months after coverage
terminated as a member of the group because of a qualifying
event;

§ 
the end of the period for
which the covered person paid a premium, if the covered person fails to make
timely payment of premium;

§ 
the date the group policy is
terminated.

Please note that if a former employee or eligible
dependent is no longer eligible for the coverage, he or she must notify the
administrator within 14 days of the triggering event.

Q     
How much will continuing coverage
cost?

A      
Mini-COBRA premiums will be
billed to the employer. Employers may be billed up to 105 percent of the current
group rate to cover the premium and administrative fees.  

Q     
Is there any assistance available for reducing the
Mini-COBRA premium?

A      
The American Recovery and
Reinvestment Act (ARRA) of 2009 temporarily reduces the Mini-COBRA premium in
some cases. If a former employee or eligible dependent is eligible for
continuation coverage as a result of an involuntary termination during the
period from July 10, 2009, to December 31, 2009, he or she may be eligible for a
premium reduction through ARRA. Because of ARRA, the premium for continuation
coverage will be reduced to 35 percent, with IBC covering the remaining 65
percent.

Q     
How does an involuntarily terminated employee apply for
the ARRA subsidy?

A      
If your employee elects
Mini-COBRA continuation coverage and
believes that he or she meets the criteria for the premium reduction, please
complete the section of the application labeled – “Application for Treatment as
an Assistance Eligible Individual” and return it to IBC. You can find the
application online at www.ins.state.pa.us.

Q     
Is everyone, who is involuntarily terminated, eligible
for a premium reduction through ARRA?

A      
No. The following individuals
are not eligible for COBRA premium
assistance through ARRA:

§ 
individuals eligible for
other group health coverage (such as a spouse’s plan) or
Medicare;

§ 
individuals involuntarily
terminated prior to July 10, 2009, whether or not they elected
COBRA;

§ 
individuals terminated for
gross misconduct;

§ 
registered domestic partners or same-sex spouses.

Q     
What are group leaders required to do? 

A      
When a qualifying event
occurs, group leaders are responsible for notifying the former employee and IBC
within 30 days. The Pennsylvania Insurance Department provides model notices on
its website, www.ins.state.pa.us, which
you can use to notify your employees.

Q     
What are members required to do? 

A      
If a former employee or
eligible dependent elects to continue coverage under Pennsylvania Mini-COBRA, he
or she must complete the Mini-COBRA application and return it to you for
verification within 30 days of notice of the qualifying event. Group leaders
have 14 days to return the application to their independent broker, consultant,
or IBC account executive.

Q     
Where is the application?

A      
The application is available
online at www.ins.state.pa.us.

Application For Review Of Denial Of COBRA Premium Reduction

Quick Link Submitting Additional Documents If You Previously Submitted An Application

General Information: If you or a family member has lost employment, a new law may make it possible for you to keep your employment-related health coverage. The American Recovery and Reinvestment Act of 2009 (ARRA) provides for premium assistance for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA.  The premium assistance is also available for continuation coverage under certain State laws. For coverage periods beginning on or after February 17, 2009, assistance eligible individuals pay only 35% of their continuation coverage premiums to the plan for the first nine months. The remaining 65% is reimbursed to the plan, employer, or health insurance issuer through a payroll tax credit.

To be eligible for assistance, you must meet All of the following requirements:

• Be eligible for continuation coverage under COBRA or a State law that provides comparable continuation coverage (for example, so-called “mini-COBRA” laws) at any time during the period beginning September 1, 2008 and ending December 31, 2009;

• Elect continuation coverage (when first offered or during the additional election period); and

• Have a qualifying event for the continuation coverage that is the employee’s involuntary termination during the period beginning September 1, 2008 and ending December 31, 2009.

The applicant (person requesting review of a denial of premium assistance) may either be the former employee or a member of the employee’s family who is eligible for COBRA continuation coverage or the COBRA premium assistance through an employment-based health plan. The employee and his/her family members may each elect to continue health coverage under COBRA, request the premium assistance, and request a review of a denial of premium assistance.

If you believe you are eligible for COBRA continuation coverage and for this premium reduction through a private sector health plan sponsored by an employer generally with at least 20 employees, but your request for these benefits or the reduced premium has been denied, you may apply to the U.S. Department of Labor to review the denial. If your continuation coverage is provided through a Federal, State or local government plan, or if it is provided pursuant to State insurance law, you should direct your request for review to the Department of Health and Human Services.

Applying For Review: Answer all of the questions on the application to the best of your knowledge and ability. If you don’t know the answer to a question you may check the box marked “Unsure or N/A.” (N/A stands for “not applicable.”) Please include copies of any documents that you think would help the Department in its review of your application, examples of which are listed in the attached instructions. Provide your complete contact information (daytime phone number, an alternate phone number, and an email address, if available) so that the person reviewing your application can contact you with any questions or if additional information is needed. The Department of Labor will not review your denial until you submit a properly completed application form. A separate application(s) must be completed for any family member whose plan information is not identical to the information you provide.

Keep a copy of the application(s) submitted for your records. Note: In the course of its review, the Department may need to share information on this application with your employer or plan
administrator.

You are encouraged to complete your application online or you can fax or mail the completed application, along with your attachments, to:

For Assistance: If you have questions on how to complete this form or about eligibility for COBRA or the COBRA premium reduction, please see our web site at www.dol.gov/COBRA. You may also call a DOL benefits advisor toll-free at 1.866.444.3272. Benefits advisors can assist you with questions, but cannot complete or take your application for review by phone.