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COBRA Subsidy Eligibility Extended by Two Months

The Employee Benefits Security Administration (EBSA) has extended the eligibility date for the COBRA premium subsidy for two additional months, through February 28, 2010.  The extension was authorized by a provision in the 2010 Defense Appropriations Act (Act). As with the original subsidy this past February, employers should become familiar with this extension and coordinate with their service providers to ensure appropriate implementation and accurate notices. (See COBRA Premium Subsidies Notice Requirements and Action Plan.) Transition time has been built in to the extension.

Employers subject to state “mini-COBRA” laws will need to monitor developments under applicable state law to see how their state reacts to the changes made by the Act.

Eligibility Period and Length of Subsidy Period

Signed into law on December 19, 2009, the Act

1. extends  the eligibility period for the ARRA premium reduction for individuals who are involuntarily terminated on or before February 28, 2010; and
2. lengthens the maximum period for receiving the subsidy by six months (from nine months to 15 months). This means that individuals who had reached the end of the reduced premium period before the extension will have additional time to pay for certain subsequent coverage periods at the reduced rate. In that case, for coverage periods that began prior to enactment of the Act, these individuals will need to pay 35 percent of applicable premium costs by the later of February 17, 2010 (60 days after date of enactment, December 19, 2009) or 30 days after notice of the extension is provided by their plan administrator.

The Act also makes clear that eligibility for COBRA need not occur on or before February 28, 2010, in order for an individual to be eligible for the subsidy, so long as the qualifying event that makes the individual eligible for the subsidy occurs on or before February 28, 2010. Thus, an individual who is involuntarily terminated on February 28, 2010, and becomes eligible for COBRA on March 1, 2010, would be eligible for the subsidy if he or she otherwise meets the requirements of an “assistance eligible individual.”

New Notice Requirements

Under the Act, group health plan administrators (employers, generally) must provide an additional notice concerning the subsidy extension. The notice is required for individuals who, on or after October 31, 2009, either:

1. are “assistance eligible individuals” or
2. experience a qualifying event (consisting of termination of employment) relating to COBRA continuation coverage.

The Act provides time to send this notice — it generally must be sent within 60 days of enactment (by February 17, 2010), unless a qualifying event occurs after December 19, 2009.  In that case, the notice, which must include information regarding the Act, must be sent pursuant to the general timing rules under existing COBRA regulations (generally 44 days from the date of the qualifying event).
A separate notice is required for certain individuals who ceased to pay their COBRA premiums or paid it in full during the original nine-month subsidy period. These individuals will be able to retroactively reinstate their coverage by paying the subsidized premiums, or, in the case of those who paid the full premiums, receive a credit or refund of premiums paid.  

More details, including new notice requirements and possibly form notices, will likely be made available from EBSA and the Internal Revenue Service shortly. If you have immediate questions, contact an attorney in the Employee Benefits practice group.