labor lawAdivision of labor law center

Many employers have questions regarding the COBRA subsidy under ARRA, the American Recovery and Reinvestment Act of 2009.

 

One of the key features under the ARRA is a 65% subsidy to provide COBRA continued healthcare coverage to the unemployed.

 

Employers need to realize that regulations are still being written for this law that went into effect on February 17, 2009. We will continue to update employers as new regulations are published.

 

COBRA, of course, is the Consolidated Omnibus Budget Reconciliation Act, a law that permits employees who have lost their jobs to continue their group insurance coverage for up to 18 months. COBRA also applies to dependents of ensured employees, and to employees who lose coverage because their hours have been reduced.

 

Only employers with 20 or more workers on the group insurance plan must offer to employees. Currently there is no provision to provide a healthcare subsidy for employees of smaller companies.

 

Generally, COBRA coverage must be the same as healthcare coverage for employees. While un-subsidized COBRA coverage is more expensive for most employees, it is still cheaper than private health insurance.

 

The COBRA subsidy applies only to employees who lost their jobs (or will lose their jobs) between September 1, 2008 and December 31, 2009. It does not apply to any employee or dependent who is eligible for Medicare, or who is eligible for coverage under another group insurance plan.

 

For example, the COBRA subsidy does not apply to a laid-off worker, if that worker can be covered under their spouse’s group insurance plan. This is true, even if the COBRA subsidy would be cheaper for the employee than the spouse’s plan.

 

Under, employers must notify a plan administrator that the employee has been terminated within 30 days. At some companies, the HR pro may be the plan administrator. Among larger companies, there is a trend to outsource this function, especially as it related to COBRA.

 

The insurance plan administrator must then send the COBRA election notice to the affected worker (or dependent)  within 14 days. The employee (or dependent) then has 60 days to elect COBRA coverage.

 

The first premium is due within 45 days after the employee (or dependent) elects COBRA coverage. This means that the employee may have 135 days or longer to pay their first COBRA premium. During this time, the employee may continue to use his or her existing insurance card. However, that premium must be paid within 45 days of the employee electing COBRA coverage, or they lose the coverage, effective on their termination date.

 

Employers who have questions regarding COBRA coverage or the subsidy can post them in the comments section of this article, or on our sister site at www.humanresourceblog.com.

 

In addition, questions can be directed to a U.S. Department of Labor COBRA Benefits Advisor at 866-444-3272.

 

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1. Posted by: mary alice grewell

   I became unemployed in December 2008, I am getting unemployment but I do not believe I will be able to come up with the initial amount to start the COBRA coverage. The amount due is over $1000. My weekly unemployment is $365. If I borrow this amount (I am not sure how I will do that) will any of the initial payment be subsadised at all. I truly appreciate the COBRA help monthly, how ever I am sure many people are in the same situation I am in. If I cannot pay the initial premiums I will not be able to take advantage or the decreases monthly rates. Are there any plans to help out people is this situation ?

2. Posted by: Amelia

   Hi Mary Alice! Good news! Yes, you can sign up for COBRA now and pay only one month’s subsidized premium.
   Under the new COBRA subsidy program, there is a special election period for employees who were terminated between September 30, 2008 and February 17, 2009. The employer must send you notice of this enrollment period within 60 days. (Contact your employer now, to be sure you get it.)
   We assume that the $1,000 was to cover COBRA payments from December 2008 to the present. That is not necessary under the new program. You should be able to pay just 35% of one month’s normal permium, and be signed up for COBRA. Better yet, it appears that you have 45 days after enrolling in COBRA to pay it.
   For more info, check out the COBRA article Amelia posted today on the blog. HTH, and thanks for reading the blogs!~ Madison