What you need to know: On Modifications to COBRA subsidy law expand the date range for eligibility and nearly double the length of the subsidy period.
What you need to do: Employers must make sure they issue timely written notices to employees of these changes and determine what steps they will take to comply with these new requirements.
On December 19, the Department of Defense Appropriation Act extended and expanded the COBRA premium subsidy law that was set to expire on December 31. In two prior Choate Alerts, we provided a summary of the COBRA subsidy law requirements and the model notices that the Department of Labor issued to assist employers in complying with their new subsidy obligations. Please click here if you missed either of them.
Overview of subsidy extension
The law extends the 65% COBRA or state continuation health insurance coverage subsidy to employees as follows:
- Employees who have lost group health care coverage due to an involuntary termination are eligible if they were involuntarily terminated between September 1, 2008 and February 28, 2010 (previously December 31, 2009); and
- The length of the premium assistance period has been extended from nine months to 15 months.
Individuals in a “transition period” (those whose original nine months have expired) are eligible for six additional months of the subsidy. Individuals who had elected not to pay the full COBRA premium after their nine-month subsidy expired can make a retroactive payment of the reduced premiums for the period of coverage immediately following the end of the nine-month period. This payment must be made by February 17, or, if later, within 30 days from the date that notice regarding the subsidy extension was provided. For individuals who had elected to pay the full COBRA premium after their nine-month subsidy period expired, employers must refund excess premium payments made during the transition period or offset future premiums by the overpaid amounts.
Plan administrators must provide appropriate notices to terminated employees. The Department of Labor has issued model COBRA notices to assist employers in complying with their notification obligations (click here to access links to the model COBRA notices.) There are three “notice packages,” tailored to fit different types of plans and individuals:
- An Updated General Notice must be sent to individuals whose employment was or will be terminated at any time from September 1, 2008 through February 28, 2010, and who have not yet been provided a COBRA election notice.
- A Premium Assistance Extension Notice must be provided to individuals who have already been provided a COBRA election notice that did not include information about the subsidy extension. This notice must be sent to the following individuals by the following dates:
- Individuals who were eligible for receiving premium assistance as of October 31, 2009 (unless their nine-month subsidy period has since ended) and individuals who were involuntarily terminated on or after October 31, 2009, but were provided a notice that did not include the subsidy extension information, must receive the Premium Assistance Extension Notice by February 17.
- Individuals in a transition period must be provided this notice within 60 days following the first day of the transition period (the date their nine-month period ended).
- Entities subject to state continuation coverage laws (in Massachusetts, this will generally apply to employers with less than 20 employees, who are subject to the Massachusetts “mini-COBRA” law) must send an Updated Alternative Notice to individuals who became eligible for continuation coverage under the state law between September 1, 2008 and February 28, 2010.
Employers should remember that a notice must go to all employees who separated employment between September 1, 2008 and February 28, 2010, regardless of whether the employer views the terminations as voluntary or involuntary. The reason is that employees may disagree with the employer’s characterization, in which event they have the right to request the subsidy. The Department of Labor has jurisdiction to determine whether the termination was in fact voluntary or involuntary under these circumstances.
Employers are advised to review the DOL’s updated “Fact Sheet,” which is posted on its website (click here to read). Next steps to consider include:
- Confirm how your COBRA tracking system needs to be modified to reflect the extended subsidy period for eligible individuals.
- If your COBRA is administered by a third party (often your health insurance carrier), talk with your COBRA administrator about how it plans to implement the premium subsidy extension rules.
- Prepare a list of the individuals who must receive the Updated General Notice, Premium Assistance Extension Notice, and Updated Alternative Notice. Send these notices out within the prescribed deadlines.
- Decide whether your company will refund or offset overpaid premiums from individuals in a transition period.