• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

New amendments extend COBRA 65% subsidy to May 31

by on
in Employee Benefits Program,Firing,Human Resources

by Patrick W. McGovern and Li Jing, Esqs.

Effective April 15, 2010, the 65% COBRA premium subsidy program that originally took effect in early 2009 will remain available until May 31, 2010. The new date became official on April 15 when President Obama signed the Continuing Extension Act of 2010, which stretched eligibility for the subsidy and extended several other federal benefits designed to help unemployed workers.

•    Subsidy eligibility extended to May 31: Under current law, a former employee is eligible to receive a 65% subsidy toward the cost of health insurance coverage for up to 15 months if he or she was involuntarily terminated on or after Sept. 1, 2008, and before June 1, 2010, or experienced a reduction in work hours followed by involuntary termination between March 2 and May 31, 2010.

To be eligible, the former employee must have been a participant in a group health insurance plan covered by COBRA or in a plan covered by an eligible state mini-COBRA law.

•    Subsidy available for reduced hours: In the case of an employee whose work hours were reduced and who was then involuntarily terminated between March 2 and May 31, 2010, during the 60-day period beginning on the date of the involuntary termination, plan administrators must provide an additional general COBRA notification that explains the rules for loss of coverage owing to a reduction in hours. There is no premium reduction for periods of coverage that began before Feb. 17, 2009.

Origins of COBRA subsidy

When an employee separates from employment, employers that are subject to COBRA generally must offer the terminated employee (and any family members who are covered by the group health plan) the opportunity to purchase insurance continuation coverage at the employee’s expense.

COBRA coverage generally lasts for up to 18 months after the qualifying event, which includes most employment terminations.

The COBRA subsidy originated with the American Recovery and Reinvestment Act of 2009 (ARRA), otherwise known as the federal stimulus law. It eased financial burdens for former employees by providing a subsidy to any involuntarily terminated employee and his or her dependents. The subsidy covers 65% of the cost of COBRA premiums.

The original subsidy was to have been available for just nine months.

Previous subsidy extensions

The nine-month subsidy period was enlarged to 15 months by the Department of Defense Appropriations Act of 2010 (DODA 2010), which took effect on Dec. 19, 2009.

Former employees and dependents whose first nine months of premium subsidy expired before DODA 2010 took effect have the opportunity to receive up to six more months of premium subsidy, provided they pay their 35% share of any unpaid premiums.

Former employees who continued to pay for COBRA continuation coverage after their first nine months of premium subsidy ended and before enactment of DODA 2010 may receive a credit or a refund equal to 35% of the premium costs they paid, subject to the new overall 15-month limit.

More to come?

Capitol Hill insiders widely viewed the Continuing Extension Act as a bid 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.

_________________________________

Authors: Patrick W. McGovern, Esq., is a partner and Li Jing, Esq., is an associate at Genova, Burns & Giantomasi, a New Jersey-based law firm with offices in Newark, Red Bank, Camden, New York and Philadelphia. They can be contacted at (973) 533-0777.

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/11659/new-amendments-extend-cobra-65-subsidy-to-may-31 "

Leave a Comment