labor lawAdivision of labor law center

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…)

The ARRA or American Recovery and Reinvestment Act of 2009 includes a special provision for continued healthcare coverage for unemployed workers under COBRA.

The COBRA subsidy means that many terminated workers will pay just 35% of their usual COBRA subsidy. The employer will pay the balance of the premium and take a tax credit on the quarterly payroll taxes. 

According to the latest U.S. Department of Labor COBRA Subsidy Fact Sheet, employers must conduct a special COBRA election period for qualified employees that lasts for 60 days. Notices about the special election period must be mailed to all eligible employees by April 17, 2009.

Individuals who were involuntarily terminated from September 1, 2008 through February 16, 2009 and did not elect to take COBRA coverage when it was offered, are eligible for the special election period. Workers who initially elected for the COBRA coverage but are no longer covered (perhaps because they have stopped paying the premiums) are (more…)