E-Newsletter

December 2009

COBRA Subsidy Provisions of ARRA Extended

Keith E. Kopplin, Esq.

On December 19, 2009, President Obama signed the Department of Defense Appropriations Act of 2010 into law. Among its provisions are a number of key extensions to the COBRA subsidy provisions of the American Recovery and Reinvestment Act of 2009 (ARRA), which were set to expire this month.

Background

Pursuant to the COBRA subsidy provisions of ARRA, individuals who become eligible for, and elect, COBRA continuation coverage due to the involuntary loss of employment are eligible for a 65% government subsidy of their health insurance premiums. For most plans, the subsidy became available for periods of coverage beginning on March 1, 2009. Among the subsidy's limitations, however, it only applied when the involuntary loss of employment and resulting loss of coverage both occurred before December 31, 2009. Likewise, the 65% subsidy was only made available for a maximum of 9 months; as such, the individuals who first received the subsidy in March, saw the government aid lapse in December. For an overview of how the subsidy works, see the following Krukowski & Costello e-Newsletters:

February 2009 - COBRA Premium Assistance Provisions of 2009 Federal Stimulus Package

March 2009 - COBRA Compliance, Steps to Take Now

June 2009 - COBRA Subsidy Update: DOL Issues Application for Expedited Review.

Extension

In response to the recent lapse of subsidy coverage for millions of Americans, and the looming deadline for new subsidy enrollees, Congress voted to extend both limitations in its recent defense spending bill. President Obama signed the bill on Monday, December 21, 2009. Among other things, the bill extends the eligibility deadline by two months (until the end of February 2010), and extends the maximum period of subsidy coverage by 6 months (to a total of 15 months). The bill also clarifies that employees only need to suffer an involuntary loss of employment before the end of February 2010 to be eligible for the subsidy-even if they do not become eligible for COBRA continuation coverage until a later date.

Employers should continue to monitor this development to ensure proper administration of these benefits. Among other things, the bill expressly requires plan administrators to notify individuals currently, or prospectively, eligible for the subsidy of these important amendments to the COBRA subsidy provisions of ARRA. There are also special transition rules to reinstate the coverage of individuals who failed to timely pay their full COBRA premiums (and to refund overpayments of individuals who did timely pay their full COBRA premiums), following the expiration of the subsidy, but before the bill's enactment. Although this bill provides additional relief for millions of Americans, it is widely considered a temporary fix; to that end, there has also already been discussion of a second extension to these benefits, from February to June, as part of the jobs bill expected in Congress early next year.

For guidance on this and other employment law questions, contact Krukowski & Costello, S.C.'s educational services department at (414) 423-1330.