65% COBRA subsidy extended through May 31

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in Employee Benefits Program,Firing,Human Resources

On April 15, President Obama signed into law amendments to the Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy provision of the American Recovery and Reinvestment Act stimulus law. Those amendments—plus amendments enacted in March—not only extend the time that the subsidy is available, but also offer it to certain individuals whose hours were reduced before they were involuntary terminated.

COBRA allows employees who have lost their jobs to continue buying health insurance coverage under their former employer’s plans.

Extension of subsidy

The bill extends the COBRA subsidy, which covers 65% of an individual’s portion of the premium, for involuntary terminations occurring on or before May 31, 2010. The subsidy had expired for terminations that occurred after March 31, and was revived through the end of May under this legislation.

Now, the COBRA subsidy is available to individuals who involuntarily lost their jobs between September 1, 2008, and May 31, 2010, and who were covered under their employer's health plan. Eligible individuals may receive the subsidy for up to 15 months.

COBRA for reduced hours

The legislation passed in March also created a new class of individuals eligible for the government's 65% subsidy: those who became eligible for COBRA because their hours were reduced.

Before that legislation was enacted, people who qualified for COBRA because their hours were reduced weren’t generally eligible for the subsidy.

The March legislation expanded the definition of “assistance eligible individual” to include employees whose first COBRA-qualifying event was a reduction in hours, followed by an involuntary termination. Those former employees are covered even if they did not elect COBRA after their hours were reduced.

This expansion is only available to employees who:

  1. Incurred a reduction in hours after Sept. 1, 2008
  2. Qualified for COBRA because of those reduced hours
  3. Were involuntarily terminated between March 2 and May 31, 2010.

Capitol Hill insiders widely viewed the Continuing Extension Act as a ploy to buy time for Congress to enact a longer-term extension of the COBRA subsidy, as well as long-term unemployment benefits. Congress is currently considering the American Workers, State, and Business Relief Act of 2010, which would extend the COBRA premium subsidy, perhaps through Dec. 31, 2010.

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