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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…)