Obama Extends COBRA Subsidy Benefits

In February 2009, the American Recovery and Reinvestment Act (ARRA) gave short-term COBRA subsidy benefits for assistance eligible individuals (AEI), such as employees who were involuntarily terminated between the period of September 1, 2008 and December 31, 2009.  The subsidy pays 65% of monthly health insurance premiums for these employees.

On, December 19, 2009, however, President Obama signed legislation that extended the COBRA subsidy to individuals who were involuntarily terminated between the period of September 1, 2008 to February 28, 2010.  Additionally, the length of the premium assistance period that begins for any individual who qualified for the subsidy on or after February 17, 2009, was extended from nine months to fifteen months. This legislation took effect immediately.

To reflect these changes, the DOL recently updated its model notices to help companies comply with these requirements.  These notices include:

Updated General Notice:  Typically plans subject to COBRA must provide this notice to all qualified beneficiaries who experience a qualifying event. This notice now includes updated information on the premium reduction as well as information required in a COBRA election notices.  Individuals terminated in December 2009, but who were eligible for COBRA coverage in January 2010 will need an updated General notice.

Premium Extension Notice: This notice must now be provided to all individuals who have already received an election notice that did not include the new extension period.  This notice includes information about the changes made.  The following individuals will need this notice:

1. Those who were eligible as of October 31, 2009, and those who were terminated on or after October 31, 2009 and lost health coverage, unless they were already provided a timely, updated General Notice, must be provided Premium Assistance Notice.

2. Those in a transition period must be provided this notice within 60 days of the transition period. A transition period begins after the end of the maximum number of months of premium reduction available prior to its extension. A person is only in transition if the provisions would continue to apply because of the extension from nine to 15 months and they otherwise remain eligible for premium reduction.

Updated Alternative Notice:  Insurance providers that provide group health insurance must send this updated notice to people who became eligible for continuation coverage under a State law.

These notices can be found at: http://www.dol.gov/ebsa/COBRAmodelnotice.html

California also already further extended these benefits to California employees on May 13, 2009, when Governor Schwarzenegger signed AB 23.   This bill provides federal COBRA premiums to employers that have between two and nineteen employees and places additional notice requirements on health care service plans, contract administrators, and insurers of small California employers.  Specifically this bill requires health care plans and insurers to notify qualified beneficiaries about the assistance provided by the ARRA to subsidize Cal-COBRA coverage among other notice requirements.  Governor Schwarzenegger has stated that he believes that this bill as enacted extends along with the new federal extensions.

Counsel to Management:

Employers should essentially continue to provide COBRA and Cal-Cobra benefits in the manner that they have been providing them since May of 2009 until February 28, 2010, except that subsidies for employees will be extended from 9 to 15 months for any AEIs whose subsidy expired as of November 30, 2009.  Additionally, premium extension notice must now be given within 60 days that describe these new subsidy provisions to go out to all AEIs who have been on COBRA since on or after October 31, 2009.  Employers will also be required to provide for retroactive payment of premiums and notice within 60 days for those whose subsidy period expired as of Nov. 30, 2009 and who failed to pay their premium for December coverage, and need to provide notice to these AEIs.

It is very important for employers to keep up with any future extension of the federal COBRA benefits, for which more issues will arise in late February when it again will expire as applied to some employees.  At that point, lawmakers will again need to determine if the time period will be extended.  If employers need further information on the worker notification requirements, or any other requirements under COBRA or Cal-COBRA, they should consult with their tax advisers, CPAs, medical insurers, medical trust administrators, or, as always, experienced legal counsel.