COBRA Subsidy for Employers under Stimulus Package

February 20th, 2009 Posted by Cara

The new stimulus package has employers scrambling to conform to the COBRA expansion and take advantage of the COBRA subsidy.

 

Under the American Recovery and Reinvestment Act of 2009 or ARRA, also known as President Obama’s stimulus package, health care premiums for laid off employees are partially subsidized.

 

The bill, signed into law by President Barack Obama on February 17, 2009, provides a government subsidy of COBRA continuation coverage for a maximum of 9 months for certain laid-off workers and their eligible dependents. The measure does not cover employees who voluntarily quit.

 

Under the ARRA, plan administrators need to inform eligible employees and their beneficiaries of the program, implement extended COBRA coverage periods, and implement administrative procedures to take advantage of the subsidy.

 

In one of the major changes, the ARRA will subsidize 65% of the COBRA premium charged to an “assistance eligible individual or AEI. This subsidy can continue for up to 9 months.

 

Under this program, the eligible employee, or AEI is required to pay only 35% of the premium they would normally be required to pay. The federal government will reimburse the employer for the remaining 65% of the COBRA premium.

 

Many employers are asking, “When will my COBRA subsidy premium check arrive?” The answer is, they won’t. Under the ARRA, the employer will take a credit against payroll taxes and federal income taxes withheld from employees’ compensation. This system permits employers to recover the subsidy payments in the same moth they are made.

 

Not every employee will qualify for the COBRA subsidy, however. In order to qualify, the employee must be eligible for COBRA coverage at any time on or after September 1, 2008 and on or before December 31, 2009. Only employees who are involuntarily terminated qualify. An employee who quits or is fired for misconduct does not apply for a COBRA subsidy under ARRA.

 

Employees can elect COBRA coverage during the usual COBRA election period or during a special election period provided by the ARRA.

 

AEIs include covered ex-employees, and the ex-employees covered spouse or dependent son or daughter – but only those who became eligible for COBRA coverage through the employees involuntary termination.

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  1. Posted by: John Kim

    I appreciate all the information on your blog.

    I have a question that you may know the answer to. I elected COBRA back in October 2008 when I was laid off. I could not afford the COBRA benefits for my wife and son. Would I be able to add them now through the Recovery and Reinvestment Act of 2009 by way of the the “second chance” election?

    Any insight/answers would be greatly appreciated.

  2. Posted by: Amelia

    Hi John! Yes, you will probably be able to sign up for the COBRA subsidy now. This law was designed for people like you, who could not afford COBRA when they were laid off. You should receive info from the employer about an enrollment period — called a special election period — soon. If not, contact the employer. HTH, and thanks for reading the blogs!~ Amelia

  3. Posted by: Dave

    Cobra Benefits are authorized, and before premium reduction, coverage costs are:

    Employee: 363.46
    Emp +1: 726.84
    Emp +2 or More: 981.24

    I have 2 sons and a spouse, so I would select the Emp +2 or more coverage.

    Problem: My wife is disabled, and is a Medicare recipient, but my employer policy stated it was primary, as such, the $1200 per month prescriptions would have cost under Medicare Part D cost us ~$150 per month.

    I’m not sure how to calculate what the premium subsidy would do in this instance. If I dont elect coverage for my spouse, my monthly COBRA premium is still $981.24, and I’d be eligible for 65% subsidy, but if I cover my spouse, the eligibility for subsidy is forfeit??? Should I have her drop Medicare? Some input would be appreciated.

  4. Posted by: Cara

    Hi Dave! No, dropping your spouse’s Medicare coverage will not help because anyone who is *eligible* for Medicare is not eligible for the COBRA subsidy. Even if you drop the Medicare coverage, your wife is still eligible for Medicare and therefore not eligible for the COBRA subsidy.
    You should qualify for the subsidy, but only for yourself and your two sons. (The thought process here is that since the government is already providing Medicare healthcare coverage for your spouse, they don’t need to also pay to have her covered under an additional health insurance plan.) This is perfectly acceptable — COBRA is not an all or nothing proposition. Each eligible employee and dependent can opt for coverage independently.
    Assuming you are eligible for the COBRA subsidy under the Stimulus Plan, based on the info above, your COBRA premium would be 35%. For you and your two sons, that is about $343.44 per month.
    The COBRA subsidy would pay $627.80 per month of your COBRA healtcare coverage. Yes, this means that you would have to pay about $150 per month for your wife’s prescription drugs, but that is still a savings of $487.80 per month, for 9 months for your family.
    It is possible that you could elect to have your spouse covered separately under the COBRA plan. However, since she would not qualify for the stimulus subsidy, her COBRA premium alone would probably be the $363.46 for a single person. You would be paying more each month for her additional coverage, than for you and your two sons. (Check with your employer for the COBRA rate for one dependent, no subsidy.)
    If your only claim for your wife is the $150 per month for prescription drugs, then it probably does not make sense to put her on COBRA. If she has other medical expenses that are not covered by Medicare, then it may make financial sense to cover her anyway.
    A disclaimer: this is a new program and the rules are literally being written as we type. So this information is as accurate as it can possibly be, but it could be changed in the next few weeks. HTH, and thanks for reading the blos!~ Cara

    Read more about the COBRA subsidy at: http://www.irs.gov/newsroom/article/0,,id=204505,00.html

    http://www.dol.gov/ebsa/cobra.html

  5. Posted by: Dave

    Thanks Cara!

    My problem is that the wife’s scripts under medicare are ~$1200 per month, and ~$150 on insurance plan. My hope was that since the “2 or more” was in play, that the spouse would be covered by default, and the subsidy exclusion would be moot. Looks like I’ll have to get a separate policy for the spouse and pay the subsidized $343.44 / month for the boys and I, then have a policy for her @ 363.46 / month, so the subsidy really only benefits me 28% as my net cost for that 9 months will be $706.90.

    Which brings the question (I know, probably better asked to corporate benefits advisor…): After the subsidy is over, can I drop the policy on the spouse and swing her under my existing policy?

  6. Posted by: Cara

    Hi Again, Dan! Yes, you’re right, you’re better off covering your wife, with prescription costs that high.
    Double-check with the U.S. Department of Labor on the regulations about including your wife in the +2 coverage. Since there is no additional cost, it would seem common sense to do so, but we all know that common sense often has nothing to do with federal regulations. Our fear is that you would lose the subsidy entirely if your wife were included.
    It is unlikely that you would be able to change your COBRA coverage after the election period ends. So no, you would probably not be able to add your wife to your existing +2 policy, after the subsidy ends.
    We like your plan of checking with the benefits advisor to see if there are other options. HTH, and thanks for reading the blogs!~ Cara

  7. Posted by: Carol

    Cara,

    I have done the research, and my husband meets the criteria for eligibility in the COBRA plan under ARRA, effective yesterday, 3/1/09.

    Our difficulty is that his first COBRA payment is due on 3/5, and his former employer says he has not yet been informed of any changes under the stimulus package. He is waiting to hear from the insurance company, and seems to expect our full monthly payment, in excess of $900, by Thursday.

    Is there a standard by which employers are to be notified of their new responsibility? Are we within our rights to calculate the 35% and offer our payment as such, regardless of their lack of information?

    Many thanks,
    Carol

  8. Posted by: Cara

    Hi Carol! To be frank, it sounds as if this employer is not very well informed about COBRA or the subsidy plan, and is blaming the insurance company unfairly.
    The insurance plan administrator is responsible for informing former employees of their COBRA rights, in writing, usually by certified mail. At some companies, the employer may be the plan administrator. If this employer is not the plan administrator, he has 30 days to inform the administrator that your husband has been terminated.
    Even under normal circumstances, employees and dependents must be sent COBRA election notices within 14 days after they are informed of a termination. The employee or dependent then has 60 days to decide whether to continue health insurance coverage. If the employee or dependent does elect to take coverage, the first premium is not due for 45 days after electing coverage.
    So even without the subsidy, your husband should have at least 59 days before his first COBRA premium is due, with no gap in coverage. You will continue to use your current insurance cards during that period (and possibly throughout the COBRA period.)
    The only difference under the subsidy is that the cost of continued COBRA coverage on the COBRA election notice will be less. The employer continues to pay the full COBRA premium to the insurance company — in your case, $900. However, the employer can deduct up to 65% of that amount ($585) from their regular payroll tax payments to the IRS.
    Our recommendation is that your husband not pay the $900 the employer is requesting, and ask for his COBRA election notice instead. Your husband can also refer the employer to the article above, or the links below, for more information.
    The COBRA Subsidy program is administered by the U.S. Department of Labor. You can call one of their Beneifts Advisor at 1-866-444-3272. For more info, employers can post questions on our sister site at http://www.humanresourceblog.com. HTH, and thanks for reading the blogs!~ Cara

    Read more on COBRA and the COBRA subsidy at: http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML
    http://www.dol.gov/ebsa/COBRA.html http://www.dol.gov/ebsa//faqs/faq_compliance_cobra.html

  9. Posted by: Pam

    My employer is talking about laying me off and offering me minimal hourly part-time work with no benefits in lieu of my current salaried position with full benefits. I assume they are doing this hoping I will resign so that they do not have to pay UIB benefits. Am I eligible for this subsidized COBRA plan?

  10. Posted by: Cara

    Hi Pam! Okay, first of all: normally when an employee resigns because their wages or hours have been significantly reduced, the employee still qualifies for unemployment benefits. And usually, an employee who is suddenly working part-time rather than full-time qualifies for partial unemployment benefits. (Frankly, we think your employer is taking this measure because they must, to keep the business open, not to try to “force” you to do anything.)
    An employee who loses health insurance coverage when they go from full-time to part-time qualifies for COBRA. The employee probably also qualifies for the COBRA subsidy, although we have not seen a specific regulation — so far — that explicitly states this. For that reason, you may want to phone a Benefits Advisor to determine your eligibility. HTH, and thanks for reading the blog!~Cara

  11. Posted by: Lynn

    Message
    My husband’s company offers bare minimum coverage with high premiums so I hold the insurance through my employer. If I am let go am I ineligible for Cobra subsidy? His company might as well not offer insurance for what portion they cover.

  12. Posted by: Amelia

    Hi Lynn! Unfortuantely, the COBRA subsidy does not apply to workers who qualify for coverage under another group health insurance policy, such as a spouses policy. Sadly, this is true even if the coverage on the second policy is poor. HTH,and thanks for reading the blogs!~ Amelia

  13. Posted by: Mar Red

    Message
    Hello, can anyone answer my question or questions below. I was laid off 9/1/08 and have been paying COBRA since the end of September. My question is since the stimulus plan offers 65% coverage of those payments how do I see a benefit. I have not been paying my previous employer but paying directly to COBRA. How do I get the 65% coverage and do I contact COBRA about a possible refund since I have been paying the full amount since last year.

    Any help, direction or assistance that can be offered will be greatly appreciated as I know all of you are aware that COBRA premium each month is a Big Hit in my Budget but since I’m still unemployed I absolutely think I must keep the health insurance coverage as long as I can afford it.

  14. Posted by: Amelia

    Hi Mar Red!
    There is no refund on the COBRA premiums paid for September 2008 through February 2009. The reduced COBRA premiums begin March 1, 2009 and can continue for up to 9 months. (If you have already paid the full COBRA premium for March, the excess may be applied to your April and May COBRA premiums or refunded.)
    By law, the COBRA administrator must send you notice of your new premium by April 17, 2009. You will then have up to 60 days to elect the new premium. Meanwhile, since you have not heard anything, contact both your former employer and the COBRA administrator. The link below may help. There is also a phone number at the bottom of that page, that you can call if you have additional questions. HTH, and thanks for reading the blogs!~ Amelia

    Read more about this at: http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML

  15. Posted by: Peter Macnab

    I have COBRA coverage for my family. I was laid off on Sept 23, 2008.
    How do I find out when I can expect some relief for the COBRA payments we have been struggling to make every month?

  16. Posted by: Amelia

    Hi Peter! The COBRA administrator should notify you by April 17, 2009 of your new premiums under the COBRA Premium Reduction program. The new premiums should be 35% of the old ones. Because you have not received anything yet, our suggestion is that you contact both your previous employer, and the insurance carrier. Info to contact the insurance carrier should be on the back of your insurance card. If you have correspondence regarding COBRA, the COBRA administrator may be listed on it. HTH, and thanks for reading the blogs!~ Amelia

    Read more about this at: http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML

  17. Posted by: Craig

    My daughter’s job is ending in April and she is eligible for COBRA. She had signed a contract for the job with a pre-determined end date. She would like to continue work, but knows the job is coming to an end. Does she qualify for the subsidy?

  18. Posted by: Amelia

    Hi Craig! The only way to know for sure is to contact a benefits advisor at one of the numbers we have given above. We really can’t comment on individual cases. HTH, and thanks for reading the blogs!~ Amelia

  19. Posted by: Carol

    Cara,
    I keep contacting my previous employers benefits department to sign up for the stimulis cobra. I was laid off in December. They keep telling me that I will received information by the end of April 09. Isn’t that too late. I could not afford the $1400 to sign up in Dec 08. Are they just puttin me off so I miss getting what I deserve???

  20. Posted by: Amelia

    Hi Carol! Employers have until April 17 to contact ex-employees who are entitled to the COBRA premium reduction. Many employers were caught by surprise by this new program, and are reacting slowly. Still, to be sure that you don’t miss out on anything, we suggest that you phone a U.S. Department of Labor COBRA Benefits Administrator at 1.866.444.3272. HTH, and thanks for reading the blogs!~ Cara

  21. Posted by: Shelley

    I was terminated without cause on 1-7-09. As of February 1st, 2009 my husband added me to his group insurance plan. The monthly premium to add a dependent was $600.00. If I would have made the choice to take COBRA would I qualify for the COBRA Premium Deduction?

    Shelley

  22. Posted by: Amelia

    Hi Shelley! No, you would not qualify for the COBRA Premium Reduction. The COBRA subsidy specifically excludes any employee who qualifies for coverage under another group health insurance plan, or for Medicaid. HTH, and thanks for reading the blogs!~ Amelia

  23. Posted by: Gillian Pinsky

    A colleague of mine has said that she has received a letter which states that her son who is 19 and who has left high school but is not going to college, qualifies for the COBRA subsidy since he has been dropped from their family health insurance plan. How is this possible? His father is still working and this young man voluntarily left school to go to a low paying job with no benefits. This implies that taxpayers could be subsidising thousands of young people who drop out of higher education and then take jobs with no benefits.

  24. Posted by: Amelia

    Hi Gillian! We can’t comment on this individual case, but dependents who lose health insurance coverage often qualify for COBRA coverage for up to 18 months. Generally, however, the COBRA subsidy covers only those who are without insurance coverage through no fault of their own. It is possible that the COBRA subsidy notice was sent to this young man in error, or that he genuinely qualifies. The thought process is that if the young man’s income is low, he would likely qualify for Medicaid anyway. If he required emergency medical treatment, the taxpayers would end up footing the bill anyway. It is actually cheaper to offer him health insurance coverage at 35% of the usual rate, than to have him go without any healthcare. In addition, you say the “taxpayers” are footing the bill, but since the young man is working, he is also a “taxpayer.” The assumption is that each of us will probably need government-sponsored healthcare (like Medicare) at some point in our lives, so it makes sense for everyone to chip in. Of course, the basic issue is a political one, which we cannot address in this forum — whether healthcare is a basic human right, or a benefit to be earned. HTH, and thanks for reading the blogs!~ Caitlin

  25. Posted by: Vickie Munson

    I work for a company and have had health insurance through this company for several years. My employer charged the full premium plus a $200 month administration fee to me and so I was paying $847 a month for both my husband and myself. My husband has been very ill for four years and I have to keep insurance. I decided to take a second job to get insurance that was less expensive and so I have worked two full time jobs since December of 2008. During this time my husband became gravely ill and is not going to get better. He is on oxygen (48 yrs. old), cannot walk for any distance and just had his second aortal bi-femoral bypass surgery. I kept working both jobs, sleeping at the hospital with him in between. When they sent him home and we realized that things were just going to get worse, never better I knew I could not continue working both jobs and I quit my second job and was going to go back on my other job’s insurance even though it was more expensive, but they decided that they would no longer be offering any health insurance any more and have cancelled their policy as of April 2009. I was able to get the COBRA coverage from my second job and have paid the first premium, which is actually less than the other insurance and a much better coverage. I didn’t want to quit the second job and would have kept it over the original job but it didn’t pay enough to pay my housepayment and the co-payments on my husband’s medications which exceed $500 a month after the insurance pays their portion and so I had to keep the first job. I am a diabetic myself and there is no way that I could have kept going the way that I was and continue to care for my husband. I have applied for social security for him but just found out that even if he gets it right away that he will not qualify for Medicare for two years after he begins to receive it. If I make enough to pay our housepayment (which is less than the current COBRA payment), the money needed for prescriptions and utilities, he will not qualify for Medicaid either. Do you think that there is anyway that I could qualify for the stimulus help? Everyone at the second job knows that I had to quit to take care of him. Thanks for your reply.

  26. Posted by: Amelia

    Hi Vickie! This is a really tough dilemma and you have our sympathy. Circumstances like yours are exactly why many people believe that the U.S. should have health care that covers all citizens.
    We have several suggestions in your situation. First of all, call a U.S. Department of Labor COBRA advisor at 1.866.444.3272. Explain that you had to quit your second job to take care of your husband, and find out if you can get the COBRA subsidy under those circumstances. Even if the company has ruled that you don’t qualify for the COBRA Premium Reduction, you can appeal that decision. Read more about the COBRA subsidy here: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html
    Also check with the pharmaceutical companies that manufacture your husband’s medications. Most major drug companies have programs to help people who can’t afford their medications.
    The long-term solution is probably to look for a job that offers your current salary plus health insurance, but finding a better job can be slow going in this economy. Usually larger employers offer better insurance.
    In the mean time, you may want to try desperate measures. Some jobs offer health insurance coverage for part-time workers. McDonald’s restaurants that are managed by the corporation (instead of a franchise) do, and some grocery stores do. You could find a part-time job that offers insurance, and keep it just long enough to get health insurance coverage. Then, stop coming to work because you have to care for your husband. Let the employer fire you. As long as this occurs before December 31, 2009 you will likely qualify for COBRA coverage with the subsidy. (However, be aware that the COBRA subsidy is only for 9 months.)
    The last measure is so desperate that we hesitate to even suggest it. If you and your husband were divorced (on paper only) he would probably qualify for Medicaid, based on his Social Security disability income alone. He could still live in the home that you share, and pay “rent” or a portion of the mortgage (to satisfy Medicaid requirements.) That’s a pretty drastic step, but it might get the health care coverage that he needs. HTH, and thanks for reading the blogs!~ Amelia & Cara

  27. Posted by: Debbie

    Good afternoon,

    I was laid off on Feb 17, 2009……I just got my 1st bill today dated 04/10/09 from my ex employer for the period of 02/18/09 thru 05/31/09……they charged me the full price….Am I to expect another corrected bill with the 35% amount, or do I just send in 35% ??

    Thanks for the response

  28. Posted by: Amelia

    Hi Debbie! No, the COBRA notification papers that you received initially should have listed the reduced premium on them. Contact the employer about this. Also contact a Benefits Advisor with the U.S. Department of Labor — the number is in the article above. Legally, the employer should have informed you within 14 days of your COBRA rights and the premium. Normally you have 60 days to sign up for COBRA and another 45 days to pay the first premium. But at this point, it appears that the employer is not extending the COBRA Premium Reduction (or Subsidy) to you. HTH, and thanks for reading the blogs!~ Amelia

  29. Posted by: Nacum

    HI : Thanks for all this great information !
    I lost my job and have Cobra.
    My wifes employer offers Group benefits but she never enrolled and is on my plan.
    Is she considered eligible or does she have to wait for an open enrollment in order to receive coverage ? If so then She / I are not eligible and can receive the Stimulus reduction ??

  30. Posted by: Amelia

    Hi Nacum! No, you and your wife are both eligible for coverage under her group health insurance. Under HIPAA, the Health Insurance Portability and Accountability Act, your wife’s health insurance must allow both of you to enroll when you lose your job and health care coverage. HIPAA requires that employers enroll employees and their spouses outside of the open enrollment period, after certain life events. These are called Special Enrollment Opportunities. Losing YOUR health insurance is one of the life events that triggers a Special Enrollment Opportunity for your wife’s health insurance. You need to inform your wife’s employer ASAP about this event, and sign up for insurance. You only have 30 days to do this.
    Because you are both eligible for coverage under your wife’s group health insurance policy, the COBRA subsidy does not apply to you. You would not qualify, even if your wife neglected to sigh up during the Special Enrollment Opportunity. HTH, and thanks for reading the blogs!~ Amelia

    Read more about HIPAA at: http://www.dol.gov/ebsa/faqs/faq_consumer_hipaa.html scroll down to Special Enrollment Opportunity.

  31. Posted by: Nacum

    HI Amelia : I wrote to you earlier & you answered perfectly. However I would like to clarify my exact circumstances.

    I was terminated on Feb.1 2009 & went on COBRA. My wife is employeed and her employer offers Health Insurance which she has declined to take.

    It is now 30 days past from my termination so it is past the “Special Enrollment Opportunity”.

    The AARA premium reduction period started March 1. So it would appear that we are NOT eligible for my spouses group coverage during that period which would allow us to participate in the Premium Reduction .

    Is that correct ?
    Thanks for all your help !

  32. Posted by: Amelia

    Hi Nacum! You need to talk to a U.S. Department of Labor COBRA benefits advisor about your situation. The COBRA subsidy law went into effect on Feb. 17, 2009. At that time, you were still eligible for your wife’s insurance plan — you just chose not to sign up for it. Following your logic, every terminated employee would qualify for the COBRA subsidy, even if they were entitled to other coverage, as long as they waited at least 30 days to sign up for the COBRA subsidy. That is certainly not the intention of the law. However, it may be a legal loophole. Contact the US DOL COBRA benefits advisor at 1.866.444.3272. Be sure you explain all the circumstances to the advisor — you don’t want to have to pay back the COBRA subsidy on your taxes, or even be prosecuted for fraud against the federal government. HTH, and thanks for reading the blogs!~ Amelia

  33. Posted by: dave

    Message Hi Cara,

    My company is putting me on COBRA this month, due to going from STD to LTD. Would I qualify for the 35% payment option? My company hasn’t said anything about it. Thanks for any info. I couldn’t find anything online.

  34. Posted by: Cara

    Hi dave! Most employees who are unemployed through no fault of their own, qualify for the COBRA subsidy (also called the reduced COBRA premium.) However, it is not clear from your post if the employer terminated you, or if you are on an unpaid leave of absence and simply no longer qualify for insurance benefits. In that case, you may not qualify for the COBRA subsidy, because you are still employed. Your best bet is to contact a U.S. Department of Labor COBRA benefits advisor at 1.866.444.3272. HTH, and thanks for reading the blogs!~ Cara
    read more about this at: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html

  35. Posted by: Tim

    I became disabled after a serious accident. I have been paying Cobra for myself and my wife (nearly $900. a month) I could not afford to insure my children. I was advised today, that I do qualify for the reduction, but my wife and children do not. My wife works part time and no insurance is offered by her employer to any employees. The way that I read this bill is that She (my wife) should be covered also. I was told by the insurance company that the bill states: “An employee OR spouse OR child” is eligible, it does not say “employee AND spouse AND child.” Is this correct?

  36. Posted by: Amelia

    Hi Tim! No, the employer is interpreting the COBRA subsidy plan incorrectly. If you were terminated after September 30, 2008 through no fault of your own, you, your wife and your children should all qualify for the subsidy. Call a U.S. Department of Labor Benefits Advisor at 1.866.444.3272 on the very next business day, and get this straightened out. HTH, and thanks for reading the blogs!~ Amelia

  37. Posted by: Penny

    My brother has a stage 4 GBM brain tumor and is no longer able to work. I spoke with an Employee Benefits Security Administration Benefits Advisor to find out if there is any plan besides ARRA to subsidize his COBRA premium since it appeared he would not be classified as an involuntary terminated employee. The advisor said there was an exception - something about “material negative change” and although he might get denied the first time, he could request an appeal and perhaps his application would be approved. I cannot find anything about this exception - can anyone help me?

  38. Posted by: Amelia

    Hi Penny! No, that’s not ringing a bell with us. Perhaps you should call the EBSA Advisor back and ask again?
    In some cases when an employer makes a significant (negative) change in working conditions, the employee can quit and still qualify for unemployment. For example, if a company reduces a full-time employee from 40 hours per week to 20 hours per week, and the employee quits as a result. It is not clear if the employee would then qualify for a COBRA premium reduction.
    The EBSA advisor may just be grasping at straws.
    Unfortunately, our country just doesn’t have a good system in place for those who lose their health insurance, for whatever reason. You might be able to apply for Medicaid for your brother, if he has little or no income and limited assets. Sorry — this is just one more example of how our healthcare system is broken. Wish we had better news. Thanks for reading the blogs!~ Amelia

  39. Posted by: Al

    Hi Cara,

    I found this blog through searching google for my question (part-time employee and COBRA subsidy). Thanks for the useful information and all the work you all doing here.

    This is a quote from one of your comments above: “An employee who loses health insurance coverage when they go from full-time to part-time qualifies for COBRA. The employee probably also qualifies for the COBRA subsidy, although we have not seen a specific regulation — so far — that explicitly states this.”

    I don’t know the date this comment is written, but I would like to know if there is any updates about this. Because you have said “probably qualifies”, I want to know whether there is any definite ruling in this particular case.

    Thanks for your help.
    ~ Al

  40. Posted by: Cara

    Hi Al! Yes, we have good news for you. The Benefits Administrators at the US Department of Labor have ruled that when an employee loses healthcare benefits due to an involuntary reduction in hours, the employee qualifies for the COBRA subsidy. (That is assuming, of course, that the employee is otherwise entitled to the premium reduction.) An employee who volunteered to change to part-time status would not qualify for a COBRA subsidy. But when the employee’s hours are cut due to economic conditions or a lack of business, and the employee loses health insurance as a result, the employee qualifies. HTH, and thanks for reading the blogs!~ Cara

  41. Posted by: Al

    Hi Cara,

    Thanks for your prompt response. This is great news. Could you please let me know of the internet links which cover this part of the law? I need to show them to my plan administrators that I qualify for this. Thank you so much.

    Best Regards,
    ~ Al

  42. Posted by: Cara

    Hi Al!
    The link to the complete COBRA regs is below. You may also want to phone the toll-free number at the bottom of that page. In some cases, employees have had their COBRA premium denied, and had to appeal the decision, in order to be awarded the subsidy. HTH, and thanks for reading the blogs!~ Cara

    Read more at: http://www.dol.gov/ebsa/cobra.html

  43. Posted by: Jacki

    I’m in the same situation as Al. I lost my healthcare benefits due to a decrease in hours. My insurance company tells me I do not qualify for the COBRA subsidy because I still have my job, even though I no longer qualify for benefits.

    In your latest post to Al I see I actually do qualify, but I cannot find the documentation via the http://www.dol.gov/ebsa/cobra.html website. I left a message for the Benefits Administrator at the US Department of Labor and have yet to hear back.

    Have you or Al found supporting documentation for this? If so, could I please request a copy?

    Thank you,
    Jacki

  44. Posted by: Al

    Hi Cara,

    Thanks for your time and reply. It seems that there is no subsidy :( for part-time workers if the reduction of hours is not to zero. The IRS publication 2009-27 says: “Q-3. Does an involuntary termination include a reduction in hours? A-3. Generally no. If the reduction in hours is not a reduction to zero, the mere reduction in hours is not an involuntary termination. However, an employee’s voluntary termination in response to an employer-imposed reduction in hours may be an involuntary termination if the reduction in hours is a material negative change in the employment relationship for the employee.”

    I wish there was a difference between reduction of hours to 10% and reduction of hours to 70%!! Because the first one is more or less like reduction of hours to zero. Anyway, it seems that it is not like that now :)

    Thanks for your help and wish you all the best.

    Best Regards,
    ~ Al

  45. Posted by: Cara

    Hi Al! Well, that sucks! So apparently if you quit rather than accept the reduction in hours, you would qualify for a COBRA subsidy. (In most states you would also qualify for unemployment benefits.) But if you keep working, you do not. Sorry to hear that, but thanks for the info!~ Cara

  46. Posted by: Cara

    Hi Jacki! Sorry, but you only qualify for COBRA subsidy if you quit your job due to the reduction in hours. In many states, an employee who quits for this reason also qualifies for unemployment benefits. HTH, and thanks for reading the blogs!~ Cara

  47. Posted by: Dorothy

    MessageQuestion(s)/Comment(s):I have been offered the reduction (subsidy) for COBRA Insurance from the company I worked for. They turned it over to a processing company (name deleted )and I have sent payments for the full amounts not the reduction and the effective dates are incorrect. When I contacted the company I was informed that my insurance is not effective and that it will take sometime for them to get it in the system due to I am the first person toget the reduction. They can’t tell me how long it is going to take. Iinformed them I need to go to the doctor because I have uncontrolled hypertension and other major health issues and need medication and that I didn’t have the money to pay out of pocket and then file a claim. The only thing they could say was they were sorry and didn’t know how long it was going to take. I have sent several e-mails that they won’t answer. What can I do? Please respond. Thanks.

  48. Posted by: Amelia

    Hi Dorothy! You are probably talking to the wrong people on this. Under the COBRA subsidy, you pay 35% of your COBRA premium, and your (former) employer pays the remaining 65%. The employer then takes a credit on their quarterly payroll taxes, which reimburses them for the 65% payment.
    Many companies outsource COBRA administration, as your previous employer has done. This law has been in effect since January 2009. There is absolutely no reason why any employer or COBRA administrator should be unaware of it — and frankly, we don’t believe that they are.
    Reading between the lines here, it sounds like you have paid the 35% COBRA premium, but your employer has not paid the 65%. The COBRA outsourcing company doesn’t want to tell you this directly, so they are giving you the runaround.
    By law, you are entitled to continued insurance coverage under COBRA, and you have a limited time to get that coverage. They should have covered you anyway, since you sent payment for the full amount. (When they received payment from the employer for the 65%, they could have credited that amount for your future COBRA montly premiums.)
    We suggest that you take 3 very direct actions, and that you do them within the next 3 days. 1) Contact a U.S. Department of Labor COBRA Subsidy Benefits Advisor at (toll free) 866-444-3272. Explain your problem to them. 2) Contact your employer and calmly explain that your COBRA rights are being violated. Point out that if the U.S. Department of Labor takes action, it will be against the employer, not the COBRA administrator. Ideally, you should come away from that conversation with an assurance that you will have an insurance card in your hand within 48 to 72 hours. 3) If you do not have an insurance card within 72 hours, or if the (former) employer is not helpful, contact the U.S. Department of Labor EBSA at (toll free) 866-444-3272 and file a complaint that your COBRA rights have been violated. The U.S. Department of Labor will take it from there. HTH, and thanks for reading the blogs!~ Amelia

  49. Posted by: jackie Smith

    I have a question -

    Please confirm with me the following
    -
    1. Is it true that when an employee can not return from an FMLA Leave of absence that this is considered an involuntary term.

    2. At our company the employee can take an FMLA then an LOA -
    when the LOA is approved the employee must pay COBRA - so am I to assume that the employee on the approved additional LOA is not eligible for COBRA subsidy or could the employee on the additional LOA be eligible for COBRA subsidy if the hours are reduced to O ?

  50. Posted by: Amelia

    Hi jackie! Assumptions are always hazardous in the business world. But we’ll answer the questions you pose:
    1) Maybe. An employee who is not physically able to return to work after FMLA may be terminated by the employer for absenteeism. However, an employee who is physically able to return to work and chooses not to (such as a new mother) may be determined to have quit. If the employer is offering you a LOA and you decline it, you have quit, so that is a voluntary termination.
    2) There are too many variables to answer this question for you. Generally only terminated employees qualify for the COBRA subsidy. An employee whose hours were reduced to 0 due to lack of work, would essentially be terminated and would most likely qualify for a COBRA subsidy. However, if the employee’s hours are reduced to 0 due to the employee’s illness, the employee probably would a) not be terminated — a LOA is not a termination and b) would probably not qualify for the COBRA subsidy.
    Here’s the problem: what you really want to know is “If I go on LOA, or quit rather than go on LOA will I qualify for the COBRA subsidy?” The answer is most likely “no” but there are too many variables for us to tell for sure. Contact a COBRA advisor at 1.866.444.3272. HTH, and thanks for reading the blogs!~ Amelia

  51. Posted by: Shauntea

    I have a questions..My husband just got laid off last week so our health insurance will end on Dec.1,2009, my employer does offer insurance but we pay the full like $900.00, would my family qualify for the new cobra expansion? Thanks!!

  52. Posted by: Amelia

    Hi Shauntea! Unfortunately, no. An employee does not qualify for the COBRA subsidy if they are eligible for coverage under a spouse’s plan, even if the spouse’s coverage is more expensive. HTH, and thanks for reading the blogs!~ Amelia

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