Florida Group Health Insurance
COBRA - Benefit Continuation - Economic Stimulus Bill

Note: COBRA is very complex and complying with all COBRA regulations is very difficult.  The information below will give you a brief overview of the relevant COBRA part of the Economic Stimulus Bill.  If you are an employer, human resource person or otherwise responsible for COBRA, I strongly suggest you find professional assistance.  If you need help finding assistance e-mail and we will help you.

COBRA Continuation and the Economic Stimulus Bill

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA). The Act includes a 65% subsidy for employees who are involuntarily terminated between September 1, 2008, and December 31, 2009, and who are eligible to continue health care coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The law doesn't define involuntary termination. As under regular COBRA law, qualified beneficiaries have an independent right to elect COBRA, and the subsidy will apply to them, as well.

About the Subsidy

 To ensure that the subsidy is targeted to workers who are most in need, employees must attest that their same-year modified adjusted gross income won't exceed $125,000 ($250,000 for families). The subsidy is completely phased out for taxpayers whose modified adjusted gross income exceeds $145,000 ($290,000 for families). Employees can make a one-time permanent election out of the subsidy.

The federal government is not directly picking up 65% of the tab.   COBRA-payable entities (note that this may or may not be the terminating employer) take a credit in the form of reduced payroll tax deposits. It  is very important imperative that you work with your Payroll department, payroll service bureau or other firm or company to be sure to comply with this program.  If you would like more information on COBRA services, please e-mail your request.

Prior to taking the 65% credit, COBRA-payable entities must first actually receive employees' reduced payments.

Employers that pick up COBRA payments for employees who were voluntarily separated (a common experience that occurs during termination negotiations) will have to separate those individuals from COBRA-subsidy-eligible employees, since they're not eligible for the subsidy.

The subsidy is extended to employees with comparable COBRA coverage under state laws. In Florida, this is mini-cobra.

The standard 18-month COBRA coverage period doesn't change. The subsidy begins with coverage periods beginning on or after February 17, 2009. So, for most employees, the subsidy begins with COBRA checks they write in March. Employees' eligibility for subsidized premiums ends with the first month beginning with the earlier of the following events.
 

Group health plans may permit employees eligible for subsidies to elect any health plan options that their former employers offer to current employees, which have the same or lower premiums than their previous health benefits options. Employees have 90 days to make their elections.

Employees must notify the COBRA-payable entity of their eligibility for new group health benefits. Those who don't notify that entity may be penalized 110% of the premium. Penalties won't apply if employees simply stop paying their COBRA premiums.

Enrollment Guidelines 

Again, the length of the COBRA coverage period doesn't change. However, employees who originally elected not to take COBRA, and employees who originally elected COBRA but dropped it because they stopped paying their premiums, have a 60-day special enrollment period during which they may decide to take the subsidized premium. The 60-day period begins on the date they receive notice of their special enrollment rights. So, for example, if an employee could have elected COBRA in December 2008, but failed to do so at that time, and he elects COBRA in March 2009, his COBRA coverage runs out 18 months from December 2008, not 18 months from March 2009.

Premium Overpayment Credits 

Employees who are eligible for the subsidy, but who pay the normal 102% of their COBRA premiums for any month during the 60-day period beginning on the first day of the first month after February 17, 2009, may have those overpayments credited toward their future subsidized payments. Hitch: The COBRA-payable entity must be reasonably certain that the credit will be used within 180 days of the overpayment. If the COBRA-payable entity isn't reasonably certain, it must reimburse employees for the amount of their overpayments within 60 days.

Cobra Notice Requirement

Current COBRA notices must be rewritten to include comprehensive information regarding the subsidy. A new notice describing special enrollment rights must also be provided to employees. The Secretary of Labor is directed to release a model notice regarding special enrollment rights within 30 days.

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