Q1: I have heard that the Stimulus package signed by the President included a new temporary COBRA premium reduction. I would like more information.
COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985) provides for a temporary extension of employer-provided group health coverage, commonly called COBRA continuation coverage. The American Recovery and Reinvestment Act of 2009 (ARRA) expands eligibility for COBRA continuation coverage and provides a premium reduction to certain qualified individuals.
Individuals who are eligible for COBRA coverage because of an employee’s involuntarily termination of employment that occurred from September 1, 2008 through December 31, 2009 and who elect COBRA, may be eligible to pay a reduced premium amount that is only 35% of the premium for COBRA coverage for up to 9 months. This premium reduction is generally available for continuation coverage provided pursuant to the Federal COBRA provisions, as well as for group health insurance coverage provided pursuant to state continuation coverage laws.
If you were offered Federal COBRA continuation coverage as a result of an involuntary termination of employment that occurred on or after September 1, 2008 and you declined to take COBRA at that time, or elected COBRA and later dropped it, you may have another opportunity to elect COBRA coverage.
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Q2: How can I tell if I am eligible to receive the COBRA premium reduction?
To qualify for the COBRA premium reduction, you must:
Be eligible for COBRA continuation coverage as a result of an involuntary termination of employment at any time from September 1, 2008 through December 31, 2009; and
Elect COBRA coverage (when first offered or during the additional election period).
If you are eligible for other group health coverage (such as through a spouse’s plan or a new employer’s plan) or for Medicare you are not eligible for the premium reduction. The amount of the premium reduction is recaptured for certain high income individuals. If the amount you earn for the year is at least $125,000 (or $250,000 for married couples filing a joint Federal income tax return), all or part of the amount of the premium reduction may be recaptured by an increase in income tax liability for the year. If you think that your income may exceed the amounts above, consult your tax preparer or contact the IRS at www.irs.gov.
Note: If the employee’s termination of employment was for gross misconduct, the employee and any dependents generally would not qualify for COBRA or the premium reduction.
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Q3: My health coverage was terminated when my employer shut down and laid off all its workers. Can I get the premium reduction to pay for new health coverage?
The premium reduction is available to help qualified individuals pay for COBRA continuation health coverage. If there is no longer a health plan, there is often no COBRA coverage available, unless another related or successor employer sponsors a group health plan responsible for providing coverage to you.
If you believe a related or successor employer may be responsible for providing you with COBRA coverage, you can contact the employer directly or EBSA toll free at 1.866.444.3272 to speak to a Benefits Advisor for assistance.
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Q4: I was laid off after September 1, 2008, but declined continuation coverage because I could not afford it. Can I enroll in COBRA now and receive the premium reduction?
Generally, yes. For individuals eligible for Federal COBRA continuation coverage, if your qualifying event was an involuntary termination of employment that occurred during the period from September 1, 2008 through February 16, 2009, and are not enrolled in COBRA coverage (because you never elected COBRA or because you elected but later dropped COBRA coverage), you will get a second opportunity to enroll. Your plan is required to notify of you of the second election period by April 18, 2009, after which you have 60 days to enroll in COBRA coverage with the premium reduction.
For individuals eligible for State continuation coverage (such as state “mini-COBRA”), your state may chose but is not required to provide a second election period.
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Q5: How do I apply for the premium reduction?
If you were covered by an employment-based health plan on the last day of the employee’s employment, the plan should provide you a notice of your eligibility to elect COBRA and to receive the premium reduction. These materials should include any forms necessary for enrollment. You may also want to contact your plan directly to ask about taking advantage of the premium reduction.
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Q6: I am enrolled in COBRA coverage with my health plan and am paying premiums. If I am eligible for the premium reduction, will I receive a refund of 65% of all the premiums that I have paid since September 2008?
No. The premium reduction provisions apply only to premiums for coverage periods beginning on or after February 17, 2009. If you were eligible for the reduction but paid in full for periods of COBRA coverage beginning on or after February 17, 2009, you should contact the plan administrator or employer sponsoring the plan to discuss a credit against future payments (or refund in certain circumstances).
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Q7: If I am eligible for the premium reduction, how long will it last?
Your premium reduction can last up to 9 months. However, it will end earlier if:
You become eligible for Medicare or another group health plan (such as a plan sponsored by a new employer or a spouse’s employer), or
You reach the end of your maximum COBRA coverage period.
If you plan to continue your COBRA coverage after the premium reduction period, you will have to pay the full amount of the premium. Failure to do so may result in your loss of COBRA coverage.
Individuals paying reduced COBRA premiums must notify their plans if they become eligible for coverage under another group health plan or Medicare. Failure to do so can result in a tax penalty.
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Q8: I am currently enrolled in COBRA continuation coverage, but would like to switch to a different coverage option offered by my former employer. Can I do this?
Group health plans are permitted, but not required, to allow qualified beneficiaries to enroll in coverage that is different than the coverage they had at the time of the qualifying event. ARRA provides that changing coverage will not cause an individual to be ineligible for the COBRA premium reduction, provided that:
The premium for the different coverage is the same or lower than the coverage the individual had at the time of the qualifying event;
The different coverage is also offered to active employees; and
The different coverage is not limited to only dental coverage, vision coverage, counseling coverage, a flexible spending account, or an on-site medical clinic.
If the plan permits individuals to change coverage options, the plan must provide the individuals with a notice of their opportunity to change. Individuals have 90 days to elect to change their coverage after the notice is provided.
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Q9: What can I do if my former employer’s group health plan denies my application for a the premium reduction?
If the plan determines that you are not eligible for the premium reduction, you can request an expedited review of the denial. The Department of Labor will handle appeals related to private sector employer plans who are subject to ERISA’s COBRA provisions. The Department of Health and Human Services will handle appeals for Federal, State, and local governmental employees, as well as appeals related to group health insurance coverage provided pursuant to state continuation coverage laws. The Departments are required to make a determination regarding your appeal within 15 business days after receiving your completed application for review. [Note: Appeals to the Department of Labor must be submitted on a U.S. Department of Labor application form. The form will soon be available at www.dol.gov/COBRA and can be completed online or mailed or faxed as indicated in the instructions.] If you believe you have been inappropriately denied eligibility for the premium reduction, you may wish to speak with an Employee Benefits Security Administration Benefits Advisor at 1.866.444.3272 before filing this form.
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Q10: How can I get more information on my eligibility for COBRA or the premium reduction?
Visit the Department of Labor’s Web site at www.dol.gov/COBRA for information related to COBRA eligibility and the premium reduction. Benefits Advisors are also available to assist you at 1.866.444.3272.
I was recently terminated by my employer and was the one carrying the family’s health insurance. My former employer is going to pay 100% of the COBRA premiums for 6 months, but I am unsure of what my options are at the end of that time period. Should I be completing COBRA paperwork now or wait until the end of the six months? Will I be eligible for the 35% premium payment when I assume payments, or will I be disqualified because my wife’s company offers health insurance (even though she declined coverage at the last open enrollment)? If I am going to be disqualified, what date will be used as a qualifying event in order for my wife to enroll in her company’s health plan —- the date of my actual termination, or the end of the six months that my former employer is paying for COBRA? We have a newborn and I want to make sure we maintain health coverage.
Linda, since your COBRA was not processed through our firm’s services, we cannot give you specific guidance. However, generally, we find employers who choose to provide funding of a former employee’s COBRA premium for some period of time (i.e., an offset), require the former employee to elect, in writing, COBRA first, in order to receive such premium offset.
Once the former employee has made his/her election and the employer’s premium supplemental funding runs out (e.g., after the 6-months you described), the former employee would be responsible for picking up the premiums, thereafter and for the remainder of the COBRA coverage duration, without having to complete any additional paperwork. If the former employee is elibile for the premium subsidy, it seems that such subsidy would be avialable for the lesser remainder ot the premium subsidy period or the end of the former employee’s COBRA coverage. However, you will need to contact your employer or their administrator about their specific requirements.
The premium subsidy is only available if the COBRA coverage start date was/is on or after September 1, 2008. Therefore, the premium subsidy would not be applicable in your situation. Please refer to the following text from the Department of Labor:
An assistance eligible individual is a COBRA “qualified beneficiary” who meets all of the following requirements:
- Is eligible for COBRA continuation coverage at any time during the period beginning September 1, 2008 and ending December 31, 2009;
- Elects COBRA coverage (when first offered or during the additional election period), and
- Has a qualifying event for COBRA coverage that is the employee’s involuntary termination during the period beginning September 1, 2008 and ending December 31, 2009.
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.
My employer recently decided to cut cost by eliminating health care coverage for my position, but made COBRA available to me. Does this count as “involuntary termination?”
If you are still employed with the employer who elimminated your coverage, you would not be deemed to have had an involuntary termination. Involuntary termination referes to situations where the employer dismissed you from employment (i.e., fire, layoff, etc.).
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.
I was discharged from my last full-time position on 9/26/08, and I opted to decline COBRA coverage at that time for financial reasons. I subsequently purchased two short-term temporary health policies which covered my family and me through 3/30/09. It was near the end of March before I leared about the premium subsidy for COBRA as a result of ARRA. However, I had not yet received notification of my eligibility for the premium subsidy by the time that I had to renew short-term healthcare coverage to avoid a gap in coverage. I subsequently purchased a 90-day temporary policy from Blue Cross for April, May and June. Premium for this policy was due at the inception of coverage on 4/1/09. I finally received official notice of my eligibility for the premium subsidy from our COBRA administrator on April 19, 2009. I subsequently elected to enroll in the extended COBRA coverage and signed my enrollment form on May 26, 2009. I understand that the extended COBRA coverage with its related premium subsidy dates back to 2/17/09, but my question is: “Why am I being billed retroactively for the premium due from 2/17/09 forward when I did not have COBRA coverage for the months of February, March, April and May and in fact had other private health coverage for which I paid premium? If I elected to take COBRA on 5/26/09, why can’t I pay premium (at the subsidized level of 35%) from May forward to the end of the nine-month premium subsidy period? I postponed many needed healthcare and dental treatment procedures during the period of my private insurance coverage due to the fact that I had high-deductible plans and would therefore had to have eaten all of the cost. By the way, I have been unemployed since 9/26/09 and therefore am trying to save on healthcare costs as much as possible. Can someone comment on the requirement to pay COBRA premiums retro to 2/17/09? I have seen nothing about this question in any of the information on the DoL’s website or on my COBRA administrator’s website? Thank you very much for your assistance.
We hope the following excerpt from our blog posting on February 26, 2009, link: http://cobracontrol.com/regulations/economic-stimulus-bill-pre-presidential-signing/cobra-facts-premium-reduction/ answers your question:
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:
• is eligible for COBRA continuation coverage at any time between September 1, 2008 and December 31, 2009;
• elects COBRA coverage; and
• is eligible for COBRA as a result of the employee’s involuntary termination between September 1, 2008 and December 31, 2009.
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 prior to February 17, 2009.
ARRA treats assistance eligible individuals who pay 35 percent of their COBRA premium 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. If the credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the employer, insurer or plan for the excess.
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 starts on March 1, 2009 for plans that charge for COBRA coverage on a calendar month basis. The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 9 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.
Special COBRA Election Opportunity: Individuals involuntarily terminated from September 1, 2008 through February 16, 2009 who did not elect COBRA when it was first offered OR who did elect COBRA, but are no longer enrolled (for example because they were unable to continue paying the premium) have a new election opportunity. This election period begins on February 17, 2009 and ends 60 days after the plan provides the required notice. This special election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months from the employee’s involuntary termination). COBRA coverage elected in this special election period begins with the first period of coverage beginning on or after February 17, 2009. This special election period opportunity does not apply to coverage sponsored by employers with less than 20 employees that is subject to State law.
Notice: Plan administrators must provide notice about the premium reduction to individuals who have a COBRA qualifying event during the period from September 1, 2008 through December 31, 2009. Plan administrators may provide notices separately or along with notices they provide following a COBRA qualifying event. This notice must go to all individuals, whether they have COBRA coverage or not, who had a qualifying event from September 1, 2008 through December 31, 2009.
Individuals eligible for the special COBRA election period described above also must receive a notice informing them of this opportunity. This notice must be provided within 60 days following February 17, 2009.