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Information for Employers on the American Recovery and Reinvestment Act of 2009

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009, which includes a COBRA health insurance premium subsidy for eligible individuals. Under the law, the federal government will subsidize 65% of the cost of COBRA premiums for up to nine months for those who have been involuntarily terminated.

QUICK FACTS:

The law provides a 65% COBRA premium subsidy for workers who are involuntarily terminated between September 1, 2008 and December 31, 2009.
The subsidy is for up to nine months, effective 3/1/09.
Eligible workers pay 35% of the COBRA premium.
The employer or health insurance company will pay the 65% subsidy amount and will be reimbursed by the federal government through a quarterly payroll tax credit.
Workers who previously declined COBRA coverage may have a second opportunity to elect it now as long as their coverage terminated between 9/1/-8 and 12/31/09.

FREQUENTLY ASKED QUESTIONS:

Does the Premium Assistance for COBRA benefits apply to Federal COBRA and State Continuation Benefits?
The law applies to individuals eligible for federal COBRA benefits and those eligible for state continuation benefits, also called “mini-COBRA,” who work for employers with fewer than twenty employees.

Who is eligible for the subsidy?
Individuals who were “involuntarily terminated” from their jobs between September 1, 2008 and December 31, 2009 are eligible for the 65% COBRA premium subsidy for up to 9 months. Individuals must also elect COBRA coverage before they can receive this subsidy. The subsidy is available for individuals whose modified adjusted gross income is $145,000 per year or less (or $290,000 for a taxpayer filing a joint tax return). If their income is between $125,000 and $145,000 per year, or between $250,000 and $290,000 for a taxpayer filing a joint tax return, the subsidy amount in decreased. Participants must attest that their same-year income will not exceed $125,000 for individuals and $250,000 for families.

How do individuals apply for the subsidy?
The federal government will implement the premium assistance over the next few months. Within thirty days of the Act, the U.S. Secretary of Labor will create model notices for employers to distribute to former employees eligible for COBRA. Employers will then be required to send the forms to their former employees within 60 days. Individuals eligible for the subsidy will have sixty days from the date they receive notice to enroll in writing. Enrollment is not automatic.

When will individuals receive the subsidy?
The subsidy will be applied to premiums for the first period of coverage beginning March 1, 2009. The new law will not subsidize COBRA coverage prior to March 1, 2009. In the interim, if an individual who is eligible for the subsidy as already paid 100% of the premium out of pocket, the enrolled individual will be reimbursed the subsidy amount within 60 days or provide a premium credit, if the credit will likely be used within 180 days. The reimbursement will come from the organization that the premium was paid to.

What amount does an enrolled individual have to pay?
Individuals who qualify for the subsidy will be required to pay 35% of the COBRA premium. The former employer initially pays the remaining 65% of the subsidy. The employer will be reimbursed later by the Federal Government through a reduction in payroll taxes. The subsidy amount is not treated as income.

If an individual previously declined COBRA, is that individual able to elect the benefits now and apply for the subsidy?
The law creates a special election period for individuals laid off between September 1, 2008 and the date of the Act (February 17, 2009) who did not elect COBRA benefits. These individuals will have a second opportunity to elect COBRA, this time with a subsidy. Please note: coverage may not continue beyond the time it would have ended had the enrollee elected COBRA the employer initially offered it. The period beginning on the date that the enrollee was involuntarily terminated and ending when the COBRA coverage starts will be disregarded for the purpose of determining whether a condition is pre-existing.

Momentous is dedicating to keeping you informed. Please visit our COBRA Secion for the most current information.

For More Information Please visit the U.S. Department of Labor the website at www.dol.gov/ebsa/COBRA.html