COBRA Temporary Premium Assistance in Economic Stimulus Package
The COBRA temporary premium assistance provision survived the House-Senate economic stimulus package compromise, while the permanent extension provision of COBRA for older or long-term employees with over ten years of experience was dropped.
Below we review the COBRA provision in The American Recovery and Reinvestment Act of 2009, which Obama is expected to sign on Tuesday. The COBRA provision raises procedural questions that the regulatory agencies will need to address.
The American Recovery and Reinvestment Act provides a 65% federal subsidy for up to 9 months of COBRA for individuals who became eligible for COBRA coverage from September 1, 2008 through December 31, 2009 due to involuntary termination of employment. The bill permits these COBRA individuals to satisfy their COBRA premium by paying only 35% of the premium. Plan sponsors are permitted to reduce their payroll taxes to offset the lower premiums paid by qualified beneficiaries. The bill creates a new special election period for those who have not elected COBRA and a new notice requirement to inform individuals about the opportunity to elect COBRA and receive a federal subsidy. The government is required to create a model notice for plan sponsors to use within a quick timeframe. Our associatio0n, teh Society of Professional benefit Administrators, will be in close contact with the agencies charged with crafting this notice to determine what we can expect and when.
Who would be eligible for COBRA temporary premium assistance? Certain individuals who are eligible for COBRA coverage from September 1, 2008 through December 31, 2009 due to involuntary termination of employment that occurred during this period. Generally, premium subsidies are not available for individuals with annual incomes above $125,000 (single) or $250,000 (joint return). Subsidies are reduced for those with modified adjusted gross income up to $145,000 (single) and $290,000 (joint return). Temporary COBRA premium assistance applies to former covered employees, spouses and dependents.
When would the temporary premium assistance end? COBRA premium assistance would end on the first date that an individual is eligible for coverage under any group health plan or Medicare. Coverage under any group health plan does not include coverage consisting of only dental, vision, counseling, or referral services, coverage under a health reimbursement arrangement, or a health flexible spending arrangement, or coverage of treatment that is furnished in an on-site medical facility maintained by an employer and that consists primarily of first-aid services, prevention and wellness care. COBRA qualified beneficiaries receiving premium assistance must notify the group health plan in writing when they become eligible for other coverage, or face a penalty (110% of the premium reduction).
Even if a COBRA qualified beneficiary did not obtain other coverage of the type listed above, premium assistance would end the earliest of 9 months after the date of enactment of the stimulus package or at the end of the maximum period of continuation coverage.
Special COBRA Election Period - The Act creates a special COBRA election period for individuals who did not elect COBRA during their original election period that occurred sometime on or after September 1, 2008 or are currently in their COBRA election period and have not made the COBRA election as of the enactment date. This special COBRA election period begins with the enactment date of the law and ends 60 days after the notice of availability of premium assistance is provided by the plan sponsor. The enactment date of the law is the date Obama signs the legislation (this is expected on February 17).
What is the effective date of COBRA coverage for former workers electing COBRA under the special COBRA election period? According to the Act, COBRA coverage will begin on the first
period of coverage beginning on or after the enactment date of the law. The Act refers to a period of coverage as a period for which premiums are charged, which is monthly.
Length of COBRA - COBRA coverage will not extend beyond the COBRA period that would have been required if COBRA had been originally elected. For example: If a worker was laid off on September 1, 2008 and did not elect COBRA, this worker, if he elected COBRA under the special COBRA election period, would be entitled to COBRA for the remaining months left of the original 18-month qualifying event that occurred on September 1, 2008. COBRA coverage would not be retroactive to September 1, 2008.
New Notice - The Act requires that a new notice must be provided by plan administrators within 60 days after the law is enacted to all workers let go since September 1, 2008 who became eligible for COBRA. The purpose of the notice is to inform these former workers of their new opportunity to elect COBRA and receive a subsidy from the federal government of 65% of the premium. TPAs providing this service to their clients have 60 days to develop a new COBRA notice with information about the availability of premium assistance and distribute it. The government will provide a model notice.
Notice Content - The law requires additional COBRA notice information to be given to all those workers laid off from September 1, 2008 through December 31, 2009. This additional notification may be met by amendment of existing COBRA notices or by inclusion of a separate document with your already existing COBRA notice.
According to the bill, the additional notification must include the following.1. The forms necessary for establishing eligibility for premium reduction.2. The name, address, and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with the premium reduction.3. A description of the extended election period.4. A description of the obligation of the qualified beneficiary to notify the plan providing continuation coverage of eligibility for subsequent coverage under another group health plan or eligibility for Medicare and the penalty for failure to do so.5. A description, displayed in a prominent manner, of the qualified beneficiary right to a reduced premium and any conditions on entitlement to the reduced premium.6. A description of the option to enroll in different coverage offered by the plan if the plan sponsor agrees to this option. The bill does not require this; it is optional.
In creating model COBRA notices, the government will incorporate these above elements.
Creditable Coverage - The law gives terminated workers some assistance in not triggering a 63-day break in coverage for HIPAA creditable coverage purposes. The time period beginning on the date of the qualifying event and ending with the day before the date of enactment of the Act will be disregarded for purposes of determining the 63-day break in coverage.
Note to COBRA Clients: The Employee Benefit Service Center is working closely with our Society of Professional Benefit Admnistrators and our COBRA systems vendor who is developing special software to implement the requirements of this legislation. We will update you as progress is made.