Home KnowHIPAA KnowCOBRA

COBRA Information & Links

 

DOL Website devoted to ARRA premium assistance requirements including the DOL model notices released 3/18/09 - www.DOL.gov/COBRA

 

IRS website devoted to ARRA premium assistance requirements - Click Here

 

Summary White Paper on the DOL COBRA Notice Regulations Click Here

 

The Department of Labor final COBRA notice regulations. (May 26, 2004)  Click here to link to a copy of the regulations from the DOL

 

MS Word version of the2004 DOL Model General Notice.

 

MS Word version of the2004 DOL Model Election Notice

 

White Paper on issues specific to the COBRA General Notice. Click Here

 

Breaking News - 12/21/09 - COBRA Subsidy Extended Through February 2010

 

On Saturday, December 19th, the Congress passed the Department of Defense Appropriations Act of 2010 (H.R.3326), and on Monday President Obama signed it into law. H.R. 3326 contains an extension of the existing COBRA Subsidy originally enacted as part of the American Recovery and Reinvestment Act (ARRA).

 

Click here for a detailed review of the extension

 

COBRA Premium Assistance Summary

 

Employers must quickly prepare for an increase in the number of COBRA elections and new COBRA notice requirements. The economic stimulus bill officially referred to as the American Recovery and Reinvestment Act (ARRA) was signed into law on February 17th, 2009 by President Obama. ARRA contains Federal premium assistance for COBRA premiums of certain eligible individuals.

 

The premium assistance will be available to eligible individuals beginning with coverage periods starting after February 17th, 2009, so employers have very little time to prepare for the administrative changes necessary to comply with the new rules.


Premium Assistance

 

bullet

Eligible individual will be required to pay 35% of the COBRA premium due in a timely basis under the same rules that normally apply to COBRA qualified beneficiaries. The Federal Government will provide premium assistance of 65% of the COBRA premium due. The premium assistance is calculated based on the full COBRA premium including the 2% COBRA administrative fee

bullet

The premium assistance is available to individuals covered by most State Continuation Rules as well as Federal COBRA.

bullet

The premium assistance lasts for up to nine (9) months of coverage.

bullet

The premium assistance would end as soon as an individual is eligible for other group coverage, or their eligibility for COBRA ends (such as for failure to pay premium, or reaching the end of their COBRA eligibility).

bullet

The premium assistance does not apply to Section 125 Health Flexible Spending Accounts, but is available for all other plans that are subject to COBRA (HRA, Dental, Vision, Rx, etc.).


Eligibility

 

bullet

The premium assistance is available to individuals called Assistance Eligible Individuals (AEIs). AEIs must have lost coverage due to the employee's involuntarily termination between September 1, 2008 and December 31, 2009 and must be eligible for COBRA or State continuation.

bullet

The premium assistance extends to family members eligible for COBRA who have lost coverage due to the employee’s involuntary termination.

bullet

The premium assistance does not apply to other COBRA events including divorce, reduction in hours, loss of dependent eligibility and Medicare entitlement.

bullet

The premium assistance begins to phase out for individuals with adjusted gross incomes (AGI) over $125,000 ($250,000 for those filing jointly). No premium assistance is available to anyone with an AGI over $145,000 ($290,000 for joint filers). Individuals who would otherwise be eligible for the premium assistance, but believe they will exceed the income limits, must be given the opportunity to opt-out. Employers must clearly communicate these rules to eligible individuals in COBRA notices. Individuals must then report subsidies received when they file their Federal Income Tax, and income based adjustments would be made to the individual’s tax liability at that time.

 

Special Election Provisions

 

bullet

A second special election period must be offered to AEIs who originally declined COBRA coverage and to AEIs who elected and subsequently terminated COBRA coverage.

bullet

If an eligible individual with a gap in coverage elects, coverage would be effective and premiums due prospectively from the first period of coverage after February 17, 2009 (For employers whose coverage is effective on a calendar month basis this will be March 1, 2009). Coverage for those not already on COBRA would not be made retroactive to the original COBRA event date

bullet

The special election period begins February 17, 2009 (the date of enactment) and ends 60 days after the date the employer provides the required special notice (see the next section for details on notice requirements). This provision makes the quick delivery of notices very important since any coverage an individual elects will be effective retroactively to March 1st, 2009.

bullet

The Department of Labor has released model notices to assist employers in meeting these requirements at www.dol.gov/COBRA

bullet

No new pre-existing limitation may be imposed on individuals who elect even it there has been a break in coverage of more than 63 days.

bullet

If an individual has already elected COBRA, the premium assistance would apply only on a prospective basis from March 1, 2009 coverage forward.

bullet

Electing the premium assistance would not change the original COBRA event date or the maximum period of coverage.

bullet

Individuals receiving the premium assistance are required to notify the employer when they become eligible for other insurance. If they fail to do so they are subject to a penalty of 110% of the amount of the premium assistance.

bullet

An employer may, but is not required to, allow an individual to change their health insurance coverage to a new option with the same or lower premiums. This option must be a plan that is also available to non-COBRA employees.


Notice Requirements

 

bullet

Employers will be required to send a special notice no later than April 18, 2009. The notice must be sent to all AEIs (individuals affected by an employee’s involuntarily termination since September 1, 2008) whether they have elected to continue COBRA or not.

bullet

Employers must also send an updated notice to ALL COBRA QBs who have had any type of COBRA event since 2/17/09.

bullet

The same notice must also be sent to any QB with any event since 9/1/08 who has not already received an election notice.

bullet

A notice must also be sent to any QB currently on COBRA notifying them of their possible eligibility for the subsidy.


Recovery of Premiums Paid

 

bullet

The employer will recover the 65% of the premium not paid by the individual through a credit applied toward the employer’s payroll taxes. If this credit is not enough to cover the cost borne by the employer, the Federal Government will directly reimburse the employer for the difference.

bullet

The IRS has released a new Form 941, that employers will use to report the credit to the IRS, and instructions for the documentation necessary to support the credit. Details can be found on the IRS website at http://www.irs.gov/newsroom/article/0,,id=204505,00.html. 

bullet

If the insurer is collecting premiums directly from the COBRA QB, there will be a mechanism developed for the insurer to be directly reimbursed by the Federal Government for the premium assistance amount.


Extension of COBRA Coverage Periods

 

bullet

Earlier versions of the bill included provisions that would have extended the COBRA continuation period for individuals who are age 55 or over or individuals who have worked for the employer at least 10 years. These provisions were not included in the final legislation.


What to Do Now

Obviously, this is very short timeframe to implement the administrative changes necessary to comply with this new legislation. Here are some things the employer can do immediately.

 

bullet

Employers should begin by figuring out who qualifies as an Assistance Eligible Individual. Any COBRA QB affected by an employee’s involuntary termination since September 1, 2008 will need to receive this special notice by April 18th, 2009.

bullet

The HR/payroll department will need to create the tracking mechanism necessary to report premium assistance details to the IRS.

bullet

Required notices must be sent as soon as possible


 

KnowHIPAA.com and KnowCOBRA.com are services of Radecki Consulting and W.J. Flynn and Associates, LLC

Contact Us