04/02: Cobra Updates
The American Recovery and Reinvestment Act of 2009 (ARRA) provides for a 65% reduction in COBRA premiums for certain assistance eligible individuals for up to 9 months. 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)
- 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.
An example of involuntary termination would include layoffs or terminations, but not terminations do to gross misconduct.
An example of a voluntary termination would include an employee terminating his employment.
Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. Other limitations may also apply, such as income. There is no premium reduction for periods of coverage that began prior to February 17, 2009.
Under the stimulus bill 65 percent of COBRA premiums are subsidized for people laid off between September 1, 2008, and December 31, 2009. The subsidy is limited to nine months and available only to those without another source of group health insurance. Individuals who lost jobs after September 1, 2008, but who didn't sign up for COBRA at the time will get a second chance to do so. Employers must provide their former workers with a notice by mid-April. Individuals who receive these notices will then have 60 days to sign up for the subsidy.
Model notices are available at http://www.dol.gov/ebsa/. Employers must have the new notices out to employees by mid April.
PREMIUMS 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.
Federal Cobra Laws apply to all employer groups with 20 or more employees. Wisconsin Continuation Law applies to all fully insured Wisconsin Employers with two or more employees.
We do know now that the ARRA, American Recovery and Reinvestment Act of 2009,does apply to Wisconsin Continuation plans. The commissioner of insurance web site does not have any new information on this so far. But we will continue to watch for forms and their interpretations.
This is what we do know so far. The look back period to September 1, of 2008, does not apply to the mini Cobra or Wisconsin Continuation plans. It seems to only apply to members having an involuntary layoff after February 1, whom are in their 30 day election period. In this example, the member is laid off on February 1, 2009; they have a 30 day right to consider their continuation option. If they elect continuation for the month of February, they will be eligible for the subsidy beginning March 1, 2009. Note: They must elect and pay for the month of February to get coverage subsidy for March 1, 2009.
ARRA gives assistance eligible people a new 60 day right to consider Cobra. This rule does not seem to apply to Wisconsin continuation, which allows for a 30 day right to consider their option of continuing coverage.
Cobra / ARRA Update
Some additional examples have been provided to help determine Assistance Eligible Individuals (AEI).
An Employee passes away: Dependents not AEI
Employee is reduced to less than 30 hours per week: May lose eligibility for coverage and be entitled to COBRA and also the AEI. So if an employee is reduced to 25 hours a week, they may lose eligibility for the insurance and qualify for COBRA and the the subsidy. Representatives from IRS have stated that if a person is reduced to 1 hour a week, they clearly cannot afford the premium and would be considered eligible as an AEI.