Help paying for COBRA health benefits

Department of Labor releases model notices on COBRA premium subsidies

As part of the stimulus package recently passed by Congress and signed into law by President Obama, you may be eligible for tremendous assistance in paying for your COBRA benefits if you are out of work (here is an explanation of COBRA benefits). Losing a job in this economy is horrible, but with this help, you don’t have to loose your past employer healthcare.

Due to changes in the stimulus package, the federal government will subsidize up to 65 percent of the cost of the COBRA premium for up to nine months after you lose your job.

It’s important to note that while COBRA healthcare benefits last for 18 months, the 65 percent federal subsidy only lasts for the first nine months.

The Department of Labor (DOL) recently published model notices for employers and group health plans to send to former employees who are eligible for Consolidated Omnibus Budget Reconciliation Act (COBRA) premium subsidies. Employers and group health plans are required to notify terminated employees of their eligibility. Access the notices.

There are four different model notices:

• General Notice (full version): The full version of the General Notice must be sent to all qualified beneficiaries — not just covered employees — who experienced a qualifying event at any time from Sept. 1, 2008 through Dec. 31, 2009, AND who either have not yet been provided an election notice or who were provided an election notice on or after Feb. 17, 2009, that did not include the additional information required by the American Recovery and Reinvestment Act of 2009 (ARRA),. This full version includes information on the premium reduction and information required in a COBRA election notice.
• General Notice (abbreviated version): This version includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include COBRA coverage election information. It may be sent in lieu of the full version to individuals with COBRA coverage who experienced a qualifying event on or after Sept. 1, 2008 and still have COBRA coverage.
• Alternative Notice: This notice must be sent to those who became eligible for continuation coverage under a state law. Continuation coverage requirements vary among states, and this model notice should be modified as necessary to conform it to applicable state law. Depending on the situation, the model Alternative Notice or the abbreviated model General Notice may be appropriate.
• Notice in Connection with Extended Election Periods: This notice must be sent to any assistance eligible individual (or anyone who would be an assistance eligible individual if a COBRA continuation election were in effect) who meets the qualifications listed below. It includes information on ARRA’s additional election opportunity, as well as premium reduction information, and must be provided by April 18, 2009. Assistance eligible individuals who must be sent this notice:
  • Have had a qualifying event at any time from Sept. 1, 2008 through Feb. 16, 2009; and
  • Did not elect COBRA continuation coverage OR elected but subsequently discontinued COBRA

  .mushroomhead, Sanchez (or whatever you call yourself these days), are you going to take me up on my offer for free one-way, first-class airline tickets for you and your partner to Jamaica? And if there is no partner and you live — as I suspect — with your mother, I’d be glad to send her with you. Just think, Liberace-like early bird dinner specials with mom and then retiring for the night to watch Wheel of Fortune reruns. How delightful.

Under the ARRA, employees or members of their family are considered “assistance eligible individuals” qualified for COBRA premium subsidies of up to 35 percent if they:

• Were eligible for COBRA continuation coverage at any time between Sept. 1 and Dec. 31, 2009;
• Elected COBRA; and
• Were eligible for COBRA as a result of the employee’s involuntary termination between Sept. 1 and Dec. 31, 2008.

If the employee or family member has other group health coverage available, such as through a spouse or Medicare, the individual is not eligible for the subsidy. Additionally, If the employee’s termination of employment was for gross misconduct, he/she and any dependents generally would not qualify for COBRA or the premium reduction. Eligible employees or their family members who did not elect COBRA when it was first offered to them may have another opportunity to do so. In certain instances, ARRA provides for a new election period beginning on Feb. 17 and lasting 60 days.

Individuals who elect to accept the premium reduction subsidy should be aware that they will be disqualified from the Health Coverage Tax Credit Program. Additionally, Congress imposed income limits on the premium reduction subsidy. If the amount the employee earned for the year exceeds $125,000 (or $250,000 for married couples filing a joint federal income tax return), the individual may have to repay all or part of the premium reduction through an increase in income tax liability for the year.

Employers will receive a tax credit to cover the remaining 65 percent of COBRA’s cost. For more information on the tax implications of the COBRA subsidy, view the statement released by the Internal Revenue Service (IRS), as well as the IRS’ questions and answers for employers.

The DOL is holding a COBRA ARRA compliance webcast on March 26; however, registration has closed. The DOL will post an archived version of the webcast online and has said that it will schedule another webcast. For more information on COBRA generally, as well as the ARRA provisions relating to COBRA, visit the DOL Web site.
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