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American Recovery and Reinvestment Act of 2009 Provides COBRA Premium Subsidies

Schipper | 19 June, 2009 08:29

The Consolidated Omnibus Budget Reconciliation Act ("COBRA") has been amended in part by the American Recovery and Reinvestment Act of 2009 ("ARRA") to subsidize COBRA eligible employees' share (previously as much as 102% of premium). The key provisions to the amendment are as follows:

Employers covered by COBRA are required to pay 65% of COBRA eligible employees' (and their family members covered under the group health plan) health coverage premium. The remaining 35% is to be paid by the eligible individual. The employer is then eligible for a tax credit in the same amount against its quarterly federal employment tax filings.

The subsidy is available to "Assistance Eligible Individuals", which are employees and their respective family members who were covered by the employer group health plan, who were involuntarily terminated between September 1, 2008 and December 31, 2009 and elect COBRA coverage.

The subsidy is available for up to 9 months unless and until the assistance eligible individual becomes eligible for another group health plan or Medicare/Medicaid.

There is retroactive eligibility for the subsidy for assistance eligible individuals who experienced an involuntary termination between August 31, 2008 and February 17, 2009 but otherwise denied or let their COBRA coverage lapse.

There is a retroactive reimbursement to assistance eligible individuals for premiums paid in excess of their 35% share or the employer may credit future COBRA premium payments.

The ARRA permits assistance eligible individuals to elect different coverage from that which they were enrolled in before involuntary termination.

The ARRA requires employers provide notice of the reductions in premiums to all individuals with a COBRA qualifying event for the September 1, 2008 through December 31, 2009 period, regardless of the reason for the qualifying event and even if the individual has denied or let COBRA coverage lapse.

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