Remember that that the American Recovery and Reinvestment Act (ARRA) provided a COBRA premium reduction for eligible individuals who were involuntarily terminated from employment through May 31, 2010. There may not have been an extension of subsidies to individuals terminated after 5/31/10, but the effects of the subsidy are still with us for at least a few more months. Recall that individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare. Those individuals who qualified for the premium reduction were only required to pay 35 percent of the COBRA premium otherwise due to the plan.
So here are some refreshers about how to deal with subsidy eligible individuals for the next few months:
- If COBRA continuation coverage lasts for more than 15 months, participants will need to pay the full amount to continue your COBRA continuation coverage. So it might be worthwhile to go into your records and find out who is getting close to that 15 month window and remind them the date on which they have to pay 100% (and not just the 35%). Correct billing will avoid problems.
- Make sure you communicate the amount of the full premium for coverage after the first 15 months before sending the bill. Even though you may not necessarily be required, it is a good "best practice" to alert those receiving subsidies about the cost of COBRA coverage they will be expected to bear.
- Set a specific time period for receiving premiums. Participants will have to pay the remaining 3 months of COBRA at 100% of the premium amount if at all possible. Make sure you establish what your grace period will be and communicate that. Without a doubt, someone will send you a check for 35% for the 16th month of coverage and you must be prepared to deal with them. Are you going to give them 30 days to pay the balance, 14 days or cut them off immediately? Whatever your position, make sure it is communicated in advance.
- Make sure you know what is being communicated to participants. The DOL has recently issued an FAQ to individuals receiving the subsidy, available here. It not only combines an explanation of subsidy eligibility, but also of the termination of subsidies. Also, check out this notice here the describes options one might have when losing the subsidy.
Despite the fact that the subsidy has an expiration date, we should anticipate that its demise will come as a shock to many participants. Make sure that you warn them before it happens to make your ongoing COBRA administrative burden smaller.