Any further extension of the COBRA subsidy continues to look more and more unlikely. At this point, employers should operate with the assumption that the COBRA subsidy extension has ended, and all COBRA notices related to terminations taking place after May 31, 2010 should reflect the general COBRA rules without the subsidy offset.
COBRA SUBSIDY BACKGROUND:
The American Recovery and Reinvestment Act (ARRA) COBRA subsidy granted a 65-percent government subsidy to help eligible unemployed individuals (and eligible dependents) pay to continue their employer-provided group health insurance benefits under COBRA for up to 9 months after involuntary employment termination.
As a result of the first COBRA subsidy extension, the 65-percent subsidy was expanded beyond 9 months to 15 months. Assistance eligible individuals pay only 35 percent of their COBRA health insurance premiums for up to 15 months while the federal government picks up the remaining 65 percent through tax credits to employers.
The second COBRA subsidy extension expanded the definition of “assistance eligible individuals” to include employees who experienced a reduction in work hours, followed by an involuntary termination on or after March 2, 2010. Previously, most employees who became eligible for COBRA benefits after losing work hours didn’t qualify for the subsidy when the involuntary-termination “trigger” followed.
The third COBRA subsidy extension extended the deadline for eligibility. Individuals involuntarily terminated between September 1, 2008 and May 31, 2010 potentially become eligible for the subsidy. Individuals needed only to be involuntarily terminated (for reasons other than gross misconduct) on or before the May 31, 2010 deadline to potentially become eligible for the subsidy, even if they didn’t qualify to continue their health insurance through COBRA until after the deadline.