What you need to know:
The most recent changes to COBRA subsidy law include a new eligibility extension date – the end of May – and transition relief.
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 April 15 the Continuing Extension Act of 2010 further extended the COBRA premium subsidy law that had expired on March 31. In prior Choate Alerts, we provided summaries of the COBRA subsidy law requirements, COBRA subsidy extensions and corresponding model notices. Please click here if you missed any of them.
Changes in subsidy extension
The Act makes the following changes to the 15-month, 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 May 31, 2010 (previously March 31, 2010).
- Reduction in hours: Employees who had a reduction of hours between September 1, 2008 and May 31, 2010 (previously March 31, 2010), followed by an involuntary termination of employment between March 2, 2010 and May 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.
The Act provides for transition relief for individuals who had lost coverage as of April 1, 2010 and, as of the Act’s April 15, 2010 enactment date, are eligible for coverage through May 31, 2010.
Plan administrators must continue to provide appropriate notices to employees who are terminated through May. Employers should remember that a notice must go (or have gone) to all employees who separated employment between September 1, 2008 and May 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.
- Update your COBRA notices to reflect the new eligibility extension date.
- Confirm how your COBRA tracking system needs to be modified to reflect the extended subsidized premiums for eligible individuals, including taking into account the transition period.
- 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.
- Keep in mind that although the Act only extended the COBRA subsidy eligibility period through May 31, Congress is currently considering a much larger bill that would extend the COBRA subsidy through December 31.