COBRA Subsidy

COBRA Subsidy Expires

The American Recovery and Reinvestment Act (ARRA) provides a COBRA premium reduction for eligible individuals who are involuntarily terminated from employment through the end of May 2010.

Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.

The Unemployment Compensation Extension Act of 2010 (HR4213) signed by the President on July 22, 2010, did not extend the COBRA premium reduction.


COBRA Subsidy Extended 

On April 15, 2010, the President signed into law (HR4851) another extension of unemployment benefits and the COBRA premium assistance that helps with the cost of health benefits for Americans who lost their jobs. This extension provides a COBRA premium subsidy for eligible individuals who are involuntarily terminated from employment through May 31, 2010.

On March 2, 2010, President Obama signed HR4691, The Temporary Extension Act of 2010. The Act extends the eligibility period for the COBRA premium subsidy until March 31, 2010.

On December 19, President Obama signed an extension of the COBRA premium subsidy as part of the Department of Defense Appropriations Act of 2010. The act extends eligibility for the COBRA premium reduction for an additional two months (through February 28, 2010), and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).

The American Recovery and Reinvestment Act of 2009 (ARRA) originally included provisions under which assistance-eligible individuals (AEIs) who involuntarily lost their jobs could receive a 65% subsidy for continuation coverage premiums for up to nine months. The act was set to expire on December 31, 2009. Under the extension, the subsidy is extended from nine months to 15 months, and AEIs can now receive the subsidy if their involuntary termination triggers COBRA by February 28, 2010.

Government Sources

From the Employee Benefit Security Administration (Department of Labor): Model Notices:

The Department created model notices to help plans and employers comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA's notice provisions, including those amended by CEA.

Model Updated General Notice 
Plans subject to the Federal COBRA provisions must provide the updated General Notice to all qualified beneficiaries (not just covered employees) who experienced a qualifying event at any time from September 1, 2008 through May 31, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice. This model notice includes updated information on the premium reduction, as well as information required in a COBRA election notice.

Note: Individuals who experienced a qualifying event that was a termination of employment from April 1, 2010 through April 14, 2010 may not have been provided proper notice. Those individuals who have not been provided any notice must get the updated General Notice and receive the full 60 days from the date the updated notice is provided to make a COBRA election. Those individuals who have been provided a notice that did not include information related to the most recent extension must also be provided this updated information. Depending on the specific circumstances, either the Supplemental Information Notice or the Notice of Extended Election Period may be used. See below for additional details

Model Notice of New Election Period 
Plans subject to continuation coverage provisions under Federal or State law should provide, within 60 days of the date of the termination of employment, a Notice of New Election Period to all individuals who:
    -experienced a qualifying event that was a reduction in hours at any time from September 1, 2008 through May 31, 2010; 
    -subsequently experience a termination of employment at any point from March 2, 2010 through May 31, 2010; and 
    -either did not elect continuation coverage when it was first offered or elected but subsequently discontinued the coverage.

Generally, individuals who have experienced a qualifying event that consists of a reduction of hours and who, from March 2, 2010 through May 31, 2010, experience an involuntary termination of employment must be provided this notice within 60 days of the event. Additionally, CEA provides that for the April 1, 2010 through April 14, 2010 period, the notice requirement attaches to any termination of employment. The Department strongly recommends that notice be provided to individuals who experienced any termination of employment because employers may be subject to civil penalties if it is later determined that the termination was involuntary and notice was not provided.

Model Supplemental Information Notice 
Plans that are subject to continuation coverage provisions under Federal or State law should provide the Supplemental Information Notice to all individuals who elected and maintained continuation coverage based on the following qualifying events:
    -all qualifying events related to a termination of employment that occurred from March 1, 2010 through April 14, 2010 for which notice of the availability of the premium reduction available under ARRA was not given; or 
    -reductions of hours that occurred during the period from September 1, 2008 through May 31, 2010 which were followed by a termination of the employee’s employment that occurred on or after March 2, 2010 and by May 31, 2010.

For the first item above, plans must provide this notice to all individuals with a qualifying event related to any termination of employment if they have not already been provided notice of their rights under ARRA. This notice must be provided before the end of the required time period for providing a COBRA election notice. For the second item above, generally, individuals who experience an involuntary termination of employment from March 2, 2010 through May 31, 2010 after experiencing a qualifying event that consists of a reduction of hours must be provided this notice within 60 days of the termination of employment. However, as noted above, CEA requires plans to provide notices to all individuals with qualifying events related to any termination of employment that occurred from April 1, 2010 through April 14, 2010. In those cases, this notice must be provided before the end of the required time period for providing a COBRA election notice. Because employers may be subject to civil penalties if it is later determined that the termination was involuntary, the Department strongly recommends that notice be provided to individuals who experienced any termination of employment.

Model Notice of Extended Election Period 
Plans that are subject to continuation coverage provisions under Federal or State law must provide, before the end of the required time period for providing a COBRA election notice, the Notice of Extended Election Period to all individuals who:
    -experienced a qualifying event that was a termination of employment at some time from April 1, 2010 through April 14, 2010; 
    -were provided notice that did not inform them of their rights under ARRA, as amended by CEA; and 
    -either chose not to elect COBRA continuation coverage at that time or elected COBRA but subsequently discontinued that coverage.

Model Updated Alternative Notice 
Insurance issuers that offer group health insurance coverage that is subject to comparable continuation coverage requirements imposed by State law must provide the Alternative Notice to all qualified beneficiaries, not just covered employees, who have experienced a qualifying event through May 31, 2010. However, because continuation coverage requirements vary among States, this notice should be further modified to reflect the requirements of the applicable State law. Issuers of group health insurance coverage subject to this notice requirement should feel free to use the model Alternative Notice, the model Notice of New Election Period, the model Supplemental Information Notice, the model Notice of Extended Election Period, or the model General Notice (as appropriate)..

Statement of Assistant Secretary Phyllis C. Borzi on the availability of the subsidy after May 31, 2010 (July 6, 2010)

Fact Sheet: COBRA Premium Reduction (Updated 4/16/2010) 

Health Care Reform and COBRA FAQs (4/16/2010)

Statement of Assistant Secretary Phyllis C. Borzi on extension of COBRA subsidy eligibility to May 31, 2010 (4/16/2010)

FAQs On The COBRA Premium Reduction Extension Provisions (Updated 4/27/10)

Application For Review Of Denial Of COBRA Premium Reduction (Updated 4/27/10)

FAQs (General) For Employees About COBRA Continuation Health Coverage 

COBRA Continuation Coverage Assistance under the American Recovery and Reinvestment Act of 2009 (General Web page)

Flyers for Employers and Employees
Flyer for Employees on the Application for Review 
FAQs for Consumers
Job Loss Posters - Small and Large versions

From the Internal Revenue Service

COBRA Health Insurance Continuation Premium Subsidy (General Web page)

COBRA Subsidy Eligibility Extended to May 31, 4/2610

COBRA Questions and Answers for Employees and Former Employees, 9/2/09

Reminder: COBRA Subsidy Recipients Who Later Become Eligible for Insurance Coverage Should Notify Their Former Employer to Avoid a Penalty, 8/25/09

IRS Notice 2009-27  is guidance provided under section 3001 of the American Recovery and Reinvestment Act of 2009 relating to the premium reduction for individuals who were involuntarily terminated and are electing COBRA continuation coverage under the group health plan of their former employer.  
Notice 2009-27 will appear in IRB 2009-16 dated April 20, 2009.

COBRA Answers for Employers 

COBRA Insurance Coverage Since the Recovery Act: Results from New Survey Data
U.S. Treasury Dept. Office of Economic Policy, 5/19/10

From the Centers for Medicare & Medicaid Services (CMS)

COBRA Continuation of Coverage  

COBRA Extension under Continuing Extension Act of 2010 (HR4851)

COBRA Extension underTemporary Extension Act of 2010 (HR4691)

COBRA Section of the Department of Defense Appropriations Act, 2010 (HR3326):

COBRA Section of the Bill

Text of ARRA:

COBRA Section of the Act 

Joint Explanatory Statement of the Committee of Conference on the COBRA Premium Reduction Provision 

Full Text of ARRA:

HR 1  
Conference Report

Additional Resources:

COBRA Subsidy Expires Amid Deficit Concerns, Towers Watson 7/10

Revised Tax Bill Does Not Include COBRA Subsidy Extension, Business Insusrance, 6/17/10

Federal Benefits for Unemployment May End, San Francisco Chronicle, 6/17/10

Senate Amendment Would Extend COBRA Subsidy, Business Insurance, 6/9/10

Senate Tax Bill Omits COBRA Subsdy Extension, Business Insurance, 6/8/10

Two-Month Extension to COBRA Subsidy Signed into Law on April 15, 2010, Groom Law Group
 
COBRA Premium Subsidy Extended, Bryan Cave 

Congress Extends and Expands COBRA Premium Subsidy Program: Employers Must Review Participant Roles for Participants Eligible for COBRA Based Upon Reduction in Hours,  Michael Best & Friedrich

ARRA Subsidy Extended- McGraw Wentworth

One Month Extension to COBRA Subsidy Signed into Law on March 2, 2010, Groom Law Group

Presidient Signs Into Law Temporary Extension of COBRA Premium Subsidy, Hewitt

COBRA Subsidy Extended an Broadened into 2010, McGuire Woods

COBRA Subsidy Period and Election Opportunities Extended, Michael Best & Friedrich

COBRA Subsidy Extension: A Gift for the Holidays, Holland & Hart

Statement of Phyllis C. Borzi on COBRA Subsidy Extension, Employee Benefit Security Administration

Congress Approves COBRA Premium Subsidy Extension, Business Insurance

As the Expiration Date for the Temporary COBRA Subsidy Approaches, DOL Clarifies Eligibility, Segal

U.S. Unemployed Face Higher Healthcare Premiums, Reuters

Health and Welfare: Year End Update Regarding COBRA Subsidy, Miller Chevalier

Ceridian Analyzes COBRA Enrollments in Light of a Premium Subsidy in ARRA, Ceridian

Hewitt Analysis Shows Average COBRA Enrollments Doubled Since Subsidy Became Available in February 2009, Hewitt

IRS Issues Guidance on Involuntary Termination for COBRA Premium Subsidy, Faegre Benson

Employee Benefits Alert: IRS Issues New Guidance on COBRA Subsidy, Mintz Levin

IRS and DOL Issue New COBRA Premium Reduction Guidance, Seyfarth Shaw

U.S. Department of Labor Issues Model Notices for New COBRA Rules, Buchanan Ingersoll  & Rooney

Stimulus Bill Ushers in Sweeping COBRA Requirements- Nixon Peabody

The COBRA Premium Subsidy Law: Understanding Your Compliance Obligations - McDermott, Will & Emery

COBRA Subsidy Provisions Included in the Stimulus Act: What Plan Sponsors and Administrators Need to Do NOW - Alston & Bird

Stimulus Plan Requires Immediate COBRA Action - Morgan Lewis

Congress Establishes Premium Subsidy for COBRA Beneficiaries - Aon Consulting

Immediate Action Needed to Implement Stimulus Act Changes to COBRA Coverage - Butzel Long

Subsidized COBRA Coverage Soon To Be Enacted - Watson Wyatt

Stimulus Package Includes 65% COBRA Premium Subsidy - Spencer Fane