Congress recently passed the Temporary Extension Act of 2010, which, in addition to extending unemployment benefits, extends and expands the COBRA premium subsidy originally provided by ARRA (the stimulus bill). The new law extends the end of the eligibility period for the COBRA subsidy from February 28, 2010 to March 31, 2010. This means that individuals involuntarily terminated between September 1, 2008 and March 31, 2010 are eligible for 15 months of subsidized COBRA premiums—with the employee paying only 35% of the actual COBRA premium.
The recent extension also expands the COBRA subsidy to those who lost their health insurance coverage as a result of a reduction in hours sometime between September 1, 2008 and March 31, 2010 and are subsequently involuntarily terminated between March 2, 2010 and March 31, 2010. Persons falling in this category who did not make a COBRA election at the time of the reduction in hours (or who made one but subsequently discontinued coverage) must be issued a new COBRA notice within 60 days of the involuntary termination, as if the involuntary termination was a new qualifying event. This notice must explain the rules regarding their special COBRA election period. Yet, if they elect coverage, their COBRA eligibility of 18 months dates back to the original qualifying event (the reduction in hours). The individual does not need to pay for COBRA premiums back to the date of the reduction in hours and can begin coverage as of the date of the involuntary termination. It appears that the COBRA subsidy, however, will only apply beginning with the period of coverage after the involuntary termination and continue for the remainder of the 18 months of COBRA eligibility. It is likely that Department of Labor guidance and model notices for these individuals will be forthcoming.
Given that this is called a “temporary extension” bill, it is likely that an additional expansion of the COBRA premium will be passed by early April.
Please see our earlier posts explaining ARRA and the prior ARRA COBRA subsidy expansions: