What you need to know: The most recent changes to COBRA subsidy law include a new eligibility extension date – the end of March – and new reduction in hours eligibility.
What you need to do: Employers need to issue notices in accordance with these changes and make sure they are in compliance with the new requirements.
On March 2, the Temporary Extension Act of 2010 further extended and expanded the COBRA premium subsidy law that expired on February 28. In three prior Choate Alerts, we provided summaries of the COBRA subsidy law requirements, the COBRA subsidy extension and corresponding model notices. Please click here if you missed any of them.
Changes in March 2010 subsidy extension
The Act makes the following changes to the 65% COBRA or state continuation health insurance coverage subsidy to employees:
- Eligibility extension: 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 March 31, 2010 (previously February 28, 2010).
- Reduction in hours: Employees who had a reduction of hours between September 1, 2008 and March 31, 2010, followed by an involuntary termination of employment between March 2, 2010 and March 31, 2010, shall be treated as incurring a qualifying event on the date of termination of employment. These individuals will be eligible for the COBRA subsidy, but the period of COBRA continuation coverage will be deemed to have begun at the time of the reduction of hours. Plan administrators must provide special notices to these individuals within 60 days of the date of involuntary termination regarding the COBRA extension and enrollment periods.
- Employer determination of qualifying event: An employer’s determination that a qualifying event was an individual’s involuntary termination of employment will be given deference, provided that the determination is reasonable and the employer maintains supporting documentation.
Plan administrators must provide appropriate notices to employees who are terminated in March 2010. Employers should remember that a notice must go (or have gone) to all employees who separated employment between September 1, 2008 and March 31, 2010, regardless of whether the employer views the terminations to have been voluntary or involuntary. This is because 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. The Act does not impose new notice requirements for employees who have previously received appropriate notices.
Employers are advised to consult the DOL’s website for updated fact sheets and model notices, which have not yet been posted. Next steps to consider include:
- Update your COBRA notices to reflect the new eligibility extension date and reduction in hours eligibility.
- Confirm how your COBRA tracking system needs to be modified to reflect the extended subsidized premiums for eligible individuals, including taking into account the reduction of hours provision.
- 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, including taking into account the reduction of hours provision.
- Keep in mind that although the Act only extended the COBRA subsidy eligibility period through March 31, Congress is now considering a much larger bill that would extend the COBRA subsidy through December 31.