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COBRA Subsidy Extension

Continuation Coverage Assistance under ARRA


ARRA

President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA) on February 17, 2009 which provided premium reductions for health benefits under COBRA. This included a 65 percent subsidy for COBRA premiums paid by qualified beneficiaries who lose group health plan coverage because a covered employee’s involuntary termination from September 1, 2008 through December 31, 2009. Moreover, the premium assistance was available for nine months of coverage.

To have qualified as an Assistance Eligible Individual, he or she must have been eligible for continuation coverage at any time during the period from September 1, 2008 through December 31, 2009 and elect the coverage; have a continuation coverage election opportunity related to an involuntary termination of employment that occurred at some time from September 1, 2008 through December 31, 2009; must not be eligible for Medicare; and not eligible for coverage under any other group health plan.

All involuntarily terminated workers and their dependents received premium assistance covering 65 percent of the cost of COBRA premiums. The subsidy also covered 65 percent of the cost of state continuation coverage premiums provided that coverage is comparable to COBRA. This premium assistance under ARRA lasted up to nine months.

Department of Defense Appropriations Act of 2010

On December 19, 2009, President Obama signed into law the Department of Defense Appropriations Act of 2010 which extended the COBRA premium subsidy established under ARRA in several ways.

The new legislation extended eligibility from December 31, 2009 to February 28, 2010 and also extended the number of subsidized months from nine to 15 months. The extension applied to those COBRA beneficiaries whose nine-month premium subsidy under ARRA had expired.

This amended the ARRA provision that required terminated employees to have been eligible for COBRA coverage by December 31, 2009. Under the DoDAA, the terminated employee must only have been terminated by December 31, 2009 even if COBRA eligibility wasn’t effective until a date in 2010. Employees need not actually be COBRA-eligible February 28, 2010, just involuntarily terminated by that date.

The act allowed a period for the retroactive payment of premiums for assistance eligible individuals whose subsidy expired and didn’t continue to pay the full unsubsidized premium. For example, if a beneficiary’s nine months of subsidized coverage ended November 30, 2009 and didn’t pay the unsubsidized premium for December 2009, he or she had the option to pay the 35 percent share of the December premium in January 2010 and receive COBRA coverage for December.

The DoDAA required employers to notify current and future COBRA beneficiaries of the new 15-month premium subsidy, and permitted employers to offset future COBRA premiums or issue refund checks for beneficiaries who overpaid their COBRA premiums by paying unsubsidized premiums but became eligible for retroactive subsidized coverage.

Temporary Extension Act

On March 2, 2010, President Obama signed into law the Temporary Extension Act of 2010 which included a second extension of the premium assistance benefit. The law also amended the COBRA ARRA law by extending the period in which one can be involuntary terminated and eligible for premium assistance to March 31, 2010.

The TEA extended premium assistance to those individuals who initially qualified for continuation coverage because of a reduction of hours and were later involuntarily terminated provided that the reduction of hours took effect on or after September 1, 2008 and the involuntary termination occurred on or before March 2, 2010. The period for counting the months of eligibility for continuation coverage must begin at the point of the initial qualifying event (reduction of hours). Upon being involuntarily terminated, these individuals had to receive a second COBRA election notice.

Continuing Extension Act

On April 15, 2010, President Obama signed the Continuing Extension Act of 2010 which extended the period in which involuntary termination may entitle individuals to premium assistance to last up through May 31, 2010. Individuals may qualify based on an involuntary termination occurring in March and through May 31, 2010 when that qualifying event follows a reduction of hours occurring from September 1, 2008 up until May 31, 2010.