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COBRA Subsidy Program Extended Until 3/31/2010

The Temporary Extension Act of 2010 (the Act) was signed into law by President Obama on Tuesday, March 2, 2010. The Act extends the COBRA subsidy eligibility period originally introduced under the American Recovery and Reinvestment Act of 2009 (ARRA), as amended by the Department of Defense Appropriations Act, 2010 (2010 DoD Act), and creates new eligibility rules for certain individuals that experience a qualifying event that is a reduction in hours of employment that is subsequently followed by an involuntary termination of employment.

Subsidy Extension

The Act extends the eligibility period for the COBRA subsidy program until March 31, 2010. Individuals that experience an involuntary termination of employment through March 31, 2010 are eligible for the subsidy available under ARRA. Election notices and procedures must be modified to reflect this new extension date.

New Rules Regarding Reduction in Hours Qualifying Events

 Any individuals who experienced a qualifying event that was a reduction in hours of employment (occurring on or after September 1, 2008) and who later experience an involuntarily termination of employment as defined by ARRA between March 2 and March 31, 2010 are eligible for the subsidy if they are otherwise an assistance eligible individual (AEI). This new rule only applies to periods of coverage beginning after March 2, 2010 (i.e. if the COBRA coverage period typically begins on the first of the month, the first subsidized COBRA coverage period would not begin until April 1, 2010).

New Election Period

Individuals that experienced a qualifying event due to a reduction in hours of employment and did not elect COBRA coverage, or elected and subsequently lost COBRA coverage, are entitled to a new COBRA election period if they subsequently experience an involuntary termination of employment between March 2 and March 31, 2010 (i.e., on or after March 2, 2010 and on or before March 31, 2010).

NOTE: Although the involuntary termination of employment is treated as the qualifying event for purposes of triggering eligibility for the subsidy, the applicable COBRA period is measured from the date of the original qualifying event (the reduction in hours of employment).

IMPORTANT: This new rule does not provide a new COBRA period to AEIs whose COBRA period has already expired simply because they have an involuntary termination of employment between March 2 and March 31, 2010.

AEIs are not required to pay for any period of coverage between the date of the reduction of hours of employment and the first period of COBRA continuation coverage following the subsequent involuntary termination of employment. Any break in coverage between the reduction in hours and the involuntary termination of employment is not treated as a "break in coverage" for HIPAA portability purposes.

If you would like to learn more about the COBRA subsidy program, please feel free to contact Sherrie Zenter 818-933-2739 directly and or visit the following online resources:

• Department of Labor Cobra Continuation Coverage Assistance Under ARRA Information: http://www.dol.gov/ebsa/cobra.html

• Internal Revenue Service COBRA Health Insurance Continuation Premium Subsidy Information: http://www.irs.gov/newsroom/article/0,,id=204505,00.html