labor lawAdivision of labor law center

On April 2, 2009 the U.S. Department of Labor issued additional regulations regarding the COBRA Premium Reduction under ARRA, the American Recovery and Reinvestment Act of 2009.

Under the ARRA, employees who were involuntarily terminated between September 1, 2008 and December 31, 2009 can keep their group health insurance and pay just 35% of the usual premium. The remaining 65% of the health insurance premium is paid by the federal government, through a credit on the employer’s quarterly payroll taxes.

Because of the new program, terminated workers who initially declined COBRA now have an opportunity to sign up for it, during the Special COBRA Election Opportunity. Each employer or COBRA administrator must inform eligible workers by April 17, 2009 of the opportunity to elect COBRA coverage at the subsidized rate. The Special COBRA Election Opportunity period began on February 17, 2009 and ends 60 days after the plan provides the required notice.

The COBRA Premium Reduction is in place for 9 months. During that time, employees pay just 35% of the total COBRA premium.

The COBRA Premium Reduction does not extend COBRA coverage for a longer period – in most cases, the employee is eligible only for coverage for 18 months.

A number of states have extended COBRA-style coverage to employers with fewer than 20 workers on group health insurance. While the COBRA subsidy does apply to these smaller “state plan” employers, the Special Election Opportunity does not. Employees who are terminated today (more…)

The 2009 COBRA Premium Reduction under the ARRA affects millions of laid-off workers, and employers are being deluged with questions on it. Here are some answers to the most frequent questions.

COBRA, the Consolidated Omnibus Budget Reconciliation Act, permits employees to extend their group health insurance after being laid off or terminated. The COBRA Subsidy reduces premiums for workers who are out of work, though no fault of their own. COBRA regulations are issued through the U.S. Department of Labor.

How much is the COBRA premium reduction?

The COBRA premium reduction is 65%, meaning that the federal government picks up 65% of the tab, while the employee pays just 35% of the usual COBRA premium.

When should employees be notified of the COBRA Premium Reduction? Employees laid off between September 1, 2008 and February 17, 2009 must be informed in writing of the premium reduction by April 17, 2009.  Employees then have 60 days after receiving notice to opt to sign up for COBRA under the reduced premium.

Employees who are terminated between February 17, 2009 and December 31, 2009 must be notified of COBRA within 60 days, just as usual. However, that notification will include the reduced premium.

Any laid-off worker who has not received notification at this point, should contact both the previous employer and the insurance administrator.

Can employees who initially declined COBRA sign up now, with the reduced premium?

Yes, an employee who was terminated between September 1, 2008 and February 17, 2009 can sign up for COBRA with reduced premiums during the special election period. This is true, even if the employee initially declined COBRA coverage when terminated.

How long does the COBRA Premium Reduction last? (more…)

As daily readers of this blog know, the ARRA or American Recovery and Reinvestment Act of 2009 provides for extended COBRA coverage at reduced cost for many unemployed workers.

COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, permits employees to extend their group health insurance coverage for up to 18 months when they lose coverage due to unemployment, a reduction in hours, divorce, or similar circumstances. COBRA also applies to dependents who lose group health insurance coverage for similar reasons, or due to the employee’s death. Employees who are fired for gross misconduct are not eligible for COBRA coverage.

The big news is that ARRA allows employees to pay just 35% of their usual COBRA premium. It also gives eligible employees a special period to sign up for COBRA coverage. This COBRA premium reduction covers any worker who has lost their job between September 1, 2008 and December 31, 2009.

Under the COBRA Premium Reduction, the employee can pay just 35% of the usual COBRA premium. The employer pays the remaining 65% of the premium, and then takes a tax credit on the quarterly federal payroll taxes. In this way, the federal government is picking up the tab on 65% of the employees group health insurance premium, and there is no gap in healthcare coverage.  

The COBRA Premium Reduction under the 2009 stimulus package applies for a maximum of 9 months.

Employees who did not opt to take advantage of COBRA coverage have a second chance (more…)

Good news for HR pros who complain that the COBRA subsidy has placed an unfair burden on employers: the federal government, not employers, will be responsible for enforcing some of the subsidy provisions.

Under the ARRA or American Recovery and Reinvestment Act of 2009, employees involuntarily terminated between September 1, 2008 and December 31, 2009 qualify for a 65% subsidy on extended group health insurance.

However, the COBRA subsidy has income limits. Reduced subsidies apply to individuals with an adjusted gross income (AGI) of $125,000 or more and couples (filing jointly) with AGI  of  $250,000 or more. Individuals with adjusted gross incomes over $145,000 and couples with income over $290,000 for the year they receive COBRA (more…)

The COBRA subsidy is one of the most notable features of the ARRA or American Recovery and Reinvestment Act signed into law on February 17, 2009. 

The employee will pay just 35% of the usual COBRA premium. Under this plan, employees who lose healthcare coverage due to terminate will qualify for a 65% government subsidy on continued group insurance coverage under COBRA.

A new U.S. Department of Labor COBRA subsidy fact sheet outlines this program.

Under this program, the employer still pays the entire healthcare premium to the insurance company. The employer can then deduct 65% of the total premium from his or her payroll taxes.

Suppose a former employee of the XYZ Corp. normally pays $900 for COBRA coverage. Under the ARRA COBRA subsidy, the employee pays 35% of that amount, (more…)