With federal COBRA subsidies for laid-off workers set to expire Dec. 31, Congress is getting ready to consider an extension—and HR pros are getting ready for administrative headaches.
In February, Congress passed the massive $789 billion American Recovery and Reinvestment Act of 2009 (ARRA), designed to stimulate the economy. Included in the bill was federal funding for eligible laid-off workers to receive a 65% subsidy toward continuation health insurance purchased under terms of the Consolidated Omnibus Budget Reconciliation Act (COBRA).
The subsidy—for up to nine months of coverage—was available to workers laid off between Sept. 1, 2008, and the end of this year.
President Obama has called for extending the subsidy, and Congress seems inclined to go along. Two bills in the House (H.R. 3930 and H.R. 3966) and one in the Senate (S. 2730) would extend COBRA subsidies for those who currently receive them, and would also provide them for workers laid off between Jan. 1, 2010, and June 30, 2010.
If Congress doesn’t act, the subsidies will expire, and anyone laid off after Dec. 31 would be ineligible.
“I would be surprised if there is not some change to the ARRA subsidy, at least an extension of the subsidy period for assistance-eligible individuals,” said Brian D. Black, an attorney with the Ogletree Deakins law firm who tracks COBRA issues.
Whether that will happen before the end of the year—the target, according to House Democratic Majority Leader Steny Hoyer—is an open question. Ongoing legislative battles over health care reform have Congress’ plate fairly full, and time may run out before it can act on the COBRA subsidies.
“I would not be surprised if Congress passes an extension in 2010 and makes it retroactive,” said Black.
And that would add complexity to an already complicated end-of-year COBRA administration process.
Take the case of a worker laid off before the end of the year, but whose health insurance premiums are paid up through mid-January. That worker wouldn’t be eligible for the subsidy, according to the Department of Labor’s Security Administration (EBSA). But someone laid off this month whose insurance runs out on Dec. 31 would be eligible for a full nine months of subsidies.
The shifting scenarios have benefits administrators scratching their heads.
Said Black, “I have heard that some employers on their own are already planning to extend the subsidy for their COBRA continuants in some fashion, assuming that the other shoe will drop” when Congress passes an extension.
Although employers are not responsible for the subsidy payments, they do have to notify laid-off employees that they are eligible for the program and verify that former workers are eligible to receive the subsidy.
Advice: Ask your benefits provider to keep you apprised of how it’s handling COBRA issues.
In the meantime, EBSA has posted limited guidance on these issues on its web site.
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