The New COBRA Challenge: Subsidies, Notices, and a Second Bite at the COBRA Apple
The American Recovery and Reinvestment Act of 2009 (Act), signed by President Obama on February 17, 2009, contains important changes to group health plan continuation coverage requirements that take effect immediately. The most important COBRA-related provisions of the Act:
- provide for a 65 percent reduction in the COBRA premium for up to nine months, for any individual who was involuntarily terminated from employment between September 1, 2008 and December 31, 2009 and his or her qualified beneficiaries, if they elected or would otherwise have been eligible for COBRA coverage;
- allow employers to recover the subsidy by offsetting the amount against their Federal payroll tax deposits;
- give employers a grace period in which to implement the reduced COBRA premium payments and revise COBRA invoices, and require employers to refund or apply excess premium payments received during this period;
- allow otherwise eligible individuals who do not have COBRA coverage in effect on February 17, 2009 a second chance to elect COBRA coverage and receive the subsidy, though this coverage will only be retroactive to the first COBRA coverage period beginning after February 17;
- require plan administrators to provide notices of the subsidy, its eligibility requirements, and the second election period, by April 18, 2009;
- extend the maximum period of COBRA coverage for two specific groups: those entitled to pension payments from the PBGC and Trade Adjustment Act eligible individuals;
- permit, but do not require, employers to allow eligible individuals to choose a less expensive health coverage option that is available to active employees.
The Act applies to COBRA, PHSA and state-mandated continuation coverage, and, therefore, covers both private and governmental employers, as well as small employers in states with mandated COBRA-like coverage. We have used the term "COBRA" to refer to all of these types of continuation coverage.
The Act contains much greater detail and many implementation requirements. You can read more about them here.
Ice Miller will continue to monitor developments and will send future e-updates as guidance is issued. Meanwhile, for more information please contact Chris Sears,
Tara Schulstad Sciscoe,
Mary Beth Braitman, Terry Mumford,
Rebecca Sczepanski or your Ice Miller LLP
employee benefits attorney. |
