Some significant additions have been made to COBRA (the Consolidated Omnibus Budget Reconciliation Act) as a result of the American Recovery and Reinvestment Act signed into law by President Barack Obama on February 17, 2009. We would like to share information about these additions and how they may affect you.
Premium subsidy
The additions to COBRA include a premium subsidy of 65 percent. That means that eligible individuals will pay only 35 percent of their COBRA premiums. The employer group will pay the remaining 65 percent and will be reimbursed through a credit it receives against its payroll taxes. The premium subsidy applies to periods of health coverage beginning on or after February 17, 2009, and lasts for up to nine months. Employers were previously allowed to charge COBRA enrollees up to 102 percent of the true cost of group health premiums, which average over $1,000 per month. Individuals who have been paying full premiums for COBRA will not receive a rebate, but their payments will decrease.
Who is eligible
The premium subsidy is available to “assistance-eligible individuals.” An “assistance-eligible individual” is an individual or a member of his or her family who meets all of the following criteria:
- is eligible for COBRA continuation coverage at any time between September 1, 2008, and December 31, 2009;
- elects COBRA coverage;
- is eligible for COBRA because of the individual’s involuntary termination between September 1, 2008, and December 31, 2009.
Who is not eligible
Not everyone who is COBRA eligible is eligible for the premium subsidy. Those who are not eligible for the subsidy include:
- individuals eligible for other group health coverage (such as a spouse’s plan) or Medicare;
- individuals involuntarily terminated prior to September 1, 2008, whether or not they elected COBRA;
- individuals terminated for gross misconduct.
Effective dates
The premium subsidy applies to health coverage beginning on or after February 17, 2009. For plans that charge for COBRA coverage on a calendar month basis, the premium subsidy will go into effect on March 1, 2009.
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 began on February 17, 2009, and ends 60 days after the group 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.
Employer action
Employers must notify affected individuals of their right to elect COBRA. The individual and his or her family each have 60 days to elect the COBRA coverage, otherwise they lose all rights to COBRA benefits. Employers must provide notification within 60 days of the February 17, 2009, enactment and no later than April 18, 2009.
More information
Department of Labor FAQ for employers
Department of Labor FAQ for employees
In addition, you may download the Department’s mandatory notification template.
COBRA Announcement
