• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

COBRA subsidy expanded, extended through May 31

by on
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. 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.

Now, the COBRA subsidy is available to individuals who involuntarily lost their jobs between Sept. 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.

The subsidy isn’t available to people who are eligible to participate in other group health plans or who are eligible for Medicare.

COBRA for reduced hours

The legislation passed in March also created a new class of individuals eligible for the government’s 65% subsidy: workers whose hours were reduced.

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

The March legislation now expands 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 choose COBRA after their hours were reduced.

This expansion is currently 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.

The period of COBRA coverage for these individuals is measured from the date of the reduction of hours that initially triggered COBRA, even if they didn’t elect COBRA coverage at the time or elected it and then dropped it before then. However, the length of the COBRA subsidy is measured from the time of the involuntary termination of employment.

New penalty provisions

Former employees who believe they have been wrongly denied the COBRA subsidy can appeal the denial to the U.S. Department of Labor (DOL).

According to the recently enacted amendments, if the DOL determines that the subsidy is due and the employer does not comply with this determination within 10 days of receiving the decision, the employer may face penalties of up to $110 per day for failure to comply.

In this regard, the new law gives the benefit of the doubt to employers about whether a termination was involuntary or not. The DOL will respect an employer’s call, as long as the determination is reasonable, based on current applicable guidance and provided that the employer maintains documentation supporting its determination.

Next steps for employers

Employers need to take the following steps in light of the new amendments:

  • Identify employees whose hours were reduced and whose employment was later involuntarily terminated.
  • Revise COBRA notices for newly terminated employees to reflect the May 31 end date of the subsidy.
  • Provide additional notice for employees whose hours were reduced and who were later involuntarily terminated. (See “COBRA subsidy notices” below.)

Finally, be on the lookout for further extensions. The House and Senate are both considering legislation that would further extend the COBRA subsidy either through the middle or end of 2010. The most recent amendments are widely seen as stopgap measures designed to buy additional time for Congress to craft longer-term solutions for subsidizing COBRA continuation health coverage.

Like what you've read? ...Republish it and share great business tips!

Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...

We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.

The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.

" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/11642/cobra-subsidy-expanded-extended-through-may-31 "

Leave a Comment