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Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. The law amends the Employee Retirement Income Security Act, the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.
COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.
Information Regarding the American Recovery And Reinvestment Act Of 2009 which provides for a 65% reduction in COBRA premiums for certain assistance eligible individuals:
On February 17, 2009, President Barack Obama signed the American Recovery and Reinvestment Act, which provides a subsidy that may reduce by 65% the cost of COBRA and other state group continuation coverage for workers who lose their jobs. On December 21, 2009, the President signed legislation that extended and expanded the premium subsidy. On March 2, 2010, legislation was enacted to extend the subsidy to involuntary terminations that occur through March 31, 2010. On April 15, 2010, the subsidy was again extended, this time to cover involuntary terminations through May 31, 2010. This extension “looks back” so that it includes involuntary terminations that occurred between April 1 and April 15, 2010.
On May 18, 2009, Governor Brad Henry signed SB553, which created a state group coverage continuation that is eligible for the subsidy.
What Are Group Coverage Continuation Laws?
Group coverage continuation laws require employers to offer employees who lose group coverage the opportunity to continue their employer-based health insurance. COBRA is the federal law that requires employers with 20+ employees to provide group continuation coverage. SB553 adds a new section to 36 O.S. § 4509, which requires health insurance issued to employers with less than 20 employees to continue coverage for up to 4 months after the employee’s health insurance is terminated.
When an Employee Loses Group Coverage and Elects Continuation, Who Pays the Premium?
The employee who lost group coverage, not the employer, must pay the entire health insurance premium.
Who is Eligible for Subsidized Coverage Under ARRA and its successors?
Individuals who lose group health coverage because of an involuntarily termination of employment (“former employees”) between September 1, 2008 and May 31, 2010 are eligible for a 65% federal subsidy of their federal COBRA or state continuation coverage premiums for up to 15 months. This subsidy phases out for workers whose income in the year they receive the subsidy exceeds $125,000 for individuals and $250,000 for couples filing joint tax returns.
Individuals who work for employers that have less than 20 employees and who are involuntarily terminated from employment between May 18, 2009 and May 31, 2010, are eligible for the subsidy for their state continuation coverage for up to 4 months.
NOTE: If an individual takes advantage of the subsidy and in the same year exceeds the income limit, he or she must repay the subsidy.
How Do Individuals Sign Up for the Subsidy?
Employers are required to send forms to former employees so that former employees can elect to continue their group coverage and receive the subsidy. Former employees will have 60 days after receiving the forms to enroll. Further details about enrollment are available through the United States Department of Labor. For the most up-to-date information, contact them at 1-866- 444-3272 or visit the agency’s website.
Does the New Law, Including the Subsidy, Apply to Group Continuation Coverage other than COBRA?
The new law, including the subsidy, applies to both federal COBRA group continuation coverage and state group continuation coverage. Oklahoma’s continuation law, applicable to insurance coverage issued to employers who employ less than 20 employees, is found at 36 O.S. § 4509.
Does the New Law Extend the Length of Available Group Continuation Coverage?
The new law does not change the length of time that group continuation coverage must be provided to eligible individuals: COBRA typically provides for up to 18 months of coverage, while Oklahoma’s continuation law provides for up to 4 months of coverage.
How will the Subsidy be Applied to Group Continuation Coverage?
Former employees who qualify for the subsidy are only required to pay 35% of the group coverage continuation premium. For COBRA eligible individuals, the former employer initially pays the remaining 65%, but the government will later reimburse the employer through a reduction in payroll taxes.
For state continuation eligible individuals, the health insurer will accept 35% of the group coverage continuation premium, but the government will later reimburse the insurer through a reduction in payroll taxes.
Former employees are not required to pay the full group coverage continuation premium and then seek a refund.
What if an Employer Refuses to Provide Group Continuation Coverage or Refuses to Provide the Subsidy?
For individuals eligible for COBRA, the law requires the United States Department of Labor to provide an expedited review of any employer’s refusal to allow a worker to elect continuation coverage and receive the subsidy. Once the denied individual submits an application for review, the Department of Labor will make an eligibility determination within 15 business days. If you have additional questions about these reviews, contact the Department of Labor at 1-866-444- 3272 or visit the agency’s website.
For coverage continued pursuant to state continuation law, the United States Department of Health and Human Services (through CMS) provides the review of a health insurer’s refusal to allow a worker to elect group continuation coverage and receive the subsidy. Once the denied individual submits an application for review, the Department of Health and Human Services willl make an eligibility determination within 15 business days. If you have additional questions about these reviews, contact the Department of Health and Human Services (through CMS) at 1-866- 400-6689 or via e-mail at firstname.lastname@example.org. You can also visit the CMS website.
Are Individuals Eligible for the Subsidy for as Long as They Are Eligible for Group Continuation Coverage?
The subsidy will not necessarily last as long as your group continuation coverage. For example, former employees typically qualify for up to 18 months of COBRA coverage. The subsidy lasts up to 15 months. Therefore, although an eligible individual is eligible to continue coverage under COBRA for 18 months, the individual may receive the premium subsidy for no more than 15 months of that period.
What If The Eligible Individual Has Already Received 9 Months Of Subsidy?
The first extension of the subsidy lengthened the subsidy period to 15 months. This meant that some eligible individuals who had exhausted their subsidy could again receive the subsidy, for up to an additional 6 months. Individuals who reached the end of the reduced premium period before the legislation extended it to 15 months have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay the 35 percent of premium costs by February 17, 2010, or, if later, 30 days after notice of the extension is provided by their plan administrator.
Individuals who lost their subsidy and paid the full 100 percent premium in December 2009 should contact their plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the overpayment.
Can an Individual Lose Eligibility for the Group Continuation Subsidy?
You can lose eligibility for the group continuation subsidy in two ways. First, as mentioned above, the subsidy lasts no longer than 15 months. Second, you become ineligible for the subsidy when you become eligible for new group health coverage or Medicare.
• Beneficiaries must notify their former employer when they become eligible for new group health coverage.
• Beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110% of the subsidy to the federal government. No such penalty shall be imposed if the beneficiary demonstrates “reasonable cause” for the failure.
NOTE: Rules governing eligibility for subsidized COBRA differ from rules governing eligibility for unsubsidized COBRA. Eligibility for unsubsidized COBRA ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the COBRA subsidy.
Does the Subsidy Affect Eligibility for other Income-Based Government Programs?
The subsidy will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program.
Does the New Law Affect Individuals Who Qualify for COBRA Due to Eligibility for Trade Adjustment Assistance or Eligibility for Benefits from the Pension Benefit Guaranty Corporation?
The new law provides significant extensions of COBRA coverage periods for individuals who receive benefits directly from the Pension Benefit Guaranty Corporation or are eligible for Trade Adjustment Assistance. If you have additional questions about these extensions, contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website.