On December 19, 2009, President Obama signed into law the 2010 Defense Appropriations Bill, which included provisions to extend the 65% federal COBRA premium subsidy. The federal COBRA subsidy has previously been available to an individual whose employment was involuntarily terminated between the dates of September 1, 2008, and December 31, 2009, who lost group health coverage during the same period, and who timely elected state or federal COBRA continuation coverage. The subsidy was originally available to such an individual for a period of up to nine months.
The new law primarily does two things:
Extends the last day on which an individual can be involuntarily terminated and still be eligible for the subsidy from December 31, 2009 to February 28, 2010. The law also changes the subsidy rules so that the date an eligible individual actually loses active coverage is not relevant in determining whether he or she is eligible for the subsidy.
- Extends the maximum subsidy period from nine months to 15 months.
The COBRA subsidy extension will affect employers sponsoring group health plans in several ways:
Those assistance-eligible individuals who dropped COBRA coverage after the subsidy expired must be given an opportunity to re-enroll in subsidized COBRA coverage for an additional six months. They can do so by retroactively paying the 35% premium for reinstated coverage before the latter of February 17, 2010, or the date that is 30 days after the plan administrator notifies the individual of this right.
An individual who began to pay the full COBRA premium after receiving the subsidy for nine months is entitled to a retroactive reimbursement of 65% of the premium for up to an additional six months. The procedure for the retroactive reimbursement is the same procedure provided for under the American Recovery and Reinvestment Act of 2009, which created the COBRA subsidy program.
Sponsors of group health plans must provide a notice describing the extended subsidy period to anyone who was eligible for the original nine-month federal subsidy at any time on or after October 31, 2009, and to anyone who, due to involuntary termination, has a "qualifying event" entitling them to elect continuation coverage on or after October 31, 2009. This notice must be provided no later than February 17, 2010, or, in the case of a qualifying event, after December 19, 2009, within the appropriate time period for providing continuation coverage notices.
Sponsors of group health plans must also provide a notice to any individual who exhausted the nine-month subsidy before December 17, 2009, and then dropped COBRA coverage or began to pay the full COBRA premium. If the individual paid the full continuation coverage premium, the notice must describe how up to six months of the subsidy will be retroactively credited to the individual or, for those who must pay additional premiums to reinstate continuation coverage, how to make payment.
- This notice must be given within 60 days of the beginning of the first period of coverage after the subsidy expires and prior to December 17, 2009. (For example, for an individual whose period of subsidized coverage ended on November 30, 2009, the notice must be provided by January 29, 2010.) If the subsidy ended more than 60 days before December 17, 2009, the employer/insurer must still provide the notice.