The American Recovery and Reinvestment Act (ARRA), signed into law on Feb. 17 temporarily imposes additional COBRA requirements in an effort to assist employees in continuing their group health benefits after involuntary termination. Historically, COBRA allowed eligible employees to elect to continue health care coverage for a limited time after termination by paying up to 100 percent of the cost share premiums, plus a 2-percent administrative fee. Now, for a limited time, the ARRA caps the premium cost share for any eligible individual at 35 percent, leaving the employer to pick up the remaining 65 percent (the “COBRA subsidy”) thereafter reimbursed through credits payroll tax credits.
The COBRA subsidy for eligible individuals lasts for the first nine months of COBRA coverage or until the individual becomes eligible for Medicare or a new group health plan, whichever occurs first. Employers must understand many components in implementing the COBRA subsidy, including the identification of eligible individuals, notification of those eligible for premium assistance, determining whether to allow the election of a lower cost benefit option and the reporting requirements for obtaining the subsidy.
Retroactive effect. Under the COBRA subsidy, any eligible individual involuntarily terminated between Sept. 1, 2008, and February 16 who did not elect COBRA coverage at the time of termination, or who did elect coverage but failed to pay premiums, receives a special 60-day election period to decide whether to take advantage of the COBRA subsidy. That is, an individual involuntarily terminated on Sept. 1, 2008, who receives notice of his COBRA subsidy rights on April 17 has until June 16 to elect COBRA coverage under the new provisions.
Notice. Employers should have already notified all individuals involuntarily terminated between Sept. 1, 2008, through and including Feb. 16 of the special COBRA election period described below by April 17, 2009. Employers who missed this deadline should provide eligible employees with appropriate notice as soon as possible. For those individuals involuntarily terminated on or after Feb. 17, 2009, employers should provide notice at the time of termination. The U.S. Department of Labor’s website offers free model notices at www.dol.gov/ebsa/cobramodelnotice.html.
