COBRA health insurance subsidy- American Recovery and Reconciliation Act of 2009

Overview

Effective February 17, 2009 a federal subsidy of COBRA health insurance premiums will be provided to involuntarily terminated employees.

  • This will apply to employees who were involuntarily terminated from September 1, 2008 through December 31, 2009 and are otherwise eligible for COBRA.
  • These “assistance eligible individuals” (AEIs) will be eligible for a federal subsidy of 65% of their COBRA premiums, and will only be responsible for the remaining 35% of the premium. Spouses and dependents are also eligible and may independently receive a subsidy.
  • The U.S. Treasury has indicated that the 65% of the premium should be calculated off of the actual amount the employer charges the individual to purchase continuation of coverage.
  • The AEI will be entitled to the subsidy for up to nine months or until becoming eligible for coverage under another employer’s plan or for Medicare. No one is eligible for the subsidy BEFORE the date of enactment (Feb. 17th 2009).

Employers are required to notify all employees who have had a COBRA qualified event on or after September 1, 2008 of the new subsidy and the requirements within 60 days of the enactment date (February 17th).

  • The employer may allow “assistance eligible individuals” (AEIs) to change their coverage options, but it is not required. The coverage must have the same or lower cost and must be available to active employees.
  • The employer must also inform AEIs that their right to the COBRA subsidy will end when the individual becomes eligible for other health plan coverage (regardless of whether or not they choose to enroll in that coverage).
  • The employer must also offer a permanent waiver of the subsidy. If the individual elects this waiver, they will not be able to receive the subsidy at a later date.
  • The Department of Labor has provided model notices. Employers may base their notices to former employees on these models.


Special information for small employer groups (groups with 2 to 19 eligible employees)

For involuntarily terminated employees that belong to employer groups with 2 to 19 eligible employees, Fallon Community Health Plan will be responsible for paying the 65% subsidy. FCHP will be reimbursed quarterly when we file for the federal payroll tax credit.

In order for FCHP to administer the subsidy, you must supply us with the following:

  • A list of COBRA subsidy eligible employees, including their date of termination
  • The COBRA health insurance premium amount you, the employer, have been charging the eligible employees (including the administrative fee of up to 2%)
  • A copy of all subsidy waivers for those eligible employees who choose to waive their subsidy rights
  • FCHP requires an attestation of involuntary termination for each AEI along with other supporting documentation as necessary.

Important Update:  Additional legislation amending the state's mini-COBRA law went into effect July 2, 2009.  This new law allows individuals involuntarily terminated from September 1, 2008, through February 16, 2009, who did not elect mini-COBRA when it was first offered or elected the continuation coverage, but let it lapse, to have a second chance to elect mini-COBRA.  The election period begins July 2, 2009 and ends 60 days after the employer informs the AEI of their second chance election opportunity.  Employers must provide notice of the second chance election opportunity within 60 days of July 2, 2009. 

FCHP letter to small employer groups (pdf, 55 KB)
FCHP letter to small employer groups - Mini-COBRA update (pdf, 66 KB)
Assistance Eligible Individual (AEI) Attestation and Verification Form (to be completed by the employer) (pdf, 26 KB)
Subsidy Waiver Form (to be completed by the employee) (pdf, 21 KB)

If you have additional questions, please contact your broker or your FCHP account manager.


Additional resources

Department of Labor Web site
www.dol.gov/ebsa/COBRA.html

IRS Web site
www.irs.gov