President Obama signed into law on December 19, 2009, an extension and expansion of the COBRA premium subsidy law that was due to expire at the end of 2009. The extension relates to the COBRA subsidy that was originally enacted under the American Recovery and Reinvestment Act of 2009 (ARRA). This extension means new compliance obligations for employers, as the subsidy period is expanded by six months and new notice requirements must be met within a tight timeframe.
OVERVIEW
The legislation is intended principally to accomplish the following:
- Extend the ARRA COBRA subsidy eligibility period to February 28, 2010;
- Extend the maximum ARRA COBRA subsidy period to 15 months; and
- Require notification to certain Assistance Eligible Individuals within 60 days of enactment to enable individuals who have dropped COBRA coverage due to cost concerns to retroactively restart coverage at subsidized rates.
ELIGIBILITY PERIOD
Previously, the eligibility period for the ARRA COBRA subsidy was to end on December 31, 2009. The new legislation extends this eligibility period to February 28, 2010, so that employees who were involuntarily terminated on or before February 28, 2010 will be eligible for the ARRA COBRA subsidy. The original eligibility criteria for the ARRA COBRA subsidy required both (i) a qualifying event (consisting of termination of employment) plus (ii) loss of coverage within the eligibility period. The new law requires only that the qualifying event (consisting of termination of employment) occur within the eligibility period.
For example, an employee who is involuntarily terminated in February 2010, and whose regular medical coverage continues through the end of February 2010 (a common plan design), will be eligible for the ARRA COBRA subsidy beginning March 1, 2010.
MAXIMUM SUBSIDY PERIOD
The legislation will extend the maximum period of ARRA COBRA subsidies from 9 months to 15 months. For example, if an individual became eligible for the ARRA COBRA subsidy on July 1, 2009, the maximum subsidy period would have originally ended on March 31, 2010. Under the legislation, the ARRA COBRA subsidy would continue for this individual until September 30, 2010.
RETROACTIVE PAYMENTS/ COVERAGE
If an Assistance Eligible Individual previously exhausted his or her ARRA COBRA subsidy and stopped paying premiums after the subsidy was exhausted, that individual may restart paying for COBRA at subsidized rates (and reinstate coverage) retroactively to when they stopped paying for COBRA.
For example, if the initial ARRA COBRA subsidy period expired for an individual on December 1, 2009 and if such Assistance Eligible Individual dropped coverage at that point due to cost (i.e., coverage did not end due to coverage under another group health plan or the occurrence of events that would otherwise cut off COBRA), the individual may now elect to pay the subsidized COBRA premium and be reinstated in his or her COBRA coverage retroactive to December 1, 2009. This retroactive coverage is similar to the retroactive coverage that was part of the original ARRA statute.
Assistance Eligible Individuals who exhausted their COBRA subsidy and started paying full COBRA premiums can receive refunds/premium credits from employers for the extra amounts that they paid.
NOTIFICATION REQUIREMENTS
Employers will be required to notify individuals who were Assistance Eligible Individuals on or after October 31, 2009 that they may continue to pay for their COBRA at subsidized rates for up to 15 months (in total) and that they may reinstate their COBRA coverage if they had stopped paying their COBRA premiums after the subsidy expired. This notice is required to be delivered within 60 days after the enactment date of the legislation; i.e., February 17, 2010.
As with the original ARRA statute, we are anticipating that additional guidance on notices and regulatory explanations will follow over the next several weeks; accordingly, we will provide compliance updates and notices soon thereafter. In the interim, employers should prepare for implementation of the COBRA subsidy extension.