COBRA health insurance subsidy
American Recovery and Reinvestment Act of 2009

April 2010 update: The COBRA subsidy election deadline for involuntary terminated “assistance eligible individuals” (AEIs) has been extended to May 31, 2010.

March 2010 update: On March 3, 2010, the Temporary Act of 2010 was passed, extending eligibility of the 15-month COBRA premium reduction for involuntary terminated “assistance eligible individuals” (AEIs). The subsidy election deadline is now March 31, 2010. The law also makes several changes to the continuation coverage subsidy requirements:

  • Under the legislation, individuals who first have a reduction in hours of employment and are subsequently involuntarily terminated from employment now qualify for the subsidy. These individuals must receive a notice informing them of their eligibility for the subsidy and COBRA enrollment rights.
  • Employers may determine whether the individual had a qualifying event (i.e., was the employee involuntarily terminated from employment). Employers are required to maintain supporting documentation of such determinations, including an attestation by the employer of involuntary termination.
  • Under the new law, federal regulatory agencies (e.g., the Department of Labor in the case of ERISA group health plans) are given greater authority to enforce successful appeals of the employer’s determinations of whether a former employee is eligible for subsidy. The provision establishes a civil penalty of $110 per day for each failure to comply with a successful appeal.

December 2009 update: On December 19, 2009, President Obama signed into law an extension of the COBRA subsidy. The subsidy election deadline has changed from December 31, 2009, to February 28, 2010. Also, Assistance Eligible Individuals (AEIs) are now eligible for the COBRA premium reduction for up to 15 months instead of 9 months.


Overview

Effective February 17, 2009, the federal government made available a COBRA subsidy for involuntarily terminated employees.

  • This applies to employees who were involuntarily terminated from September 1, 2008, through May 31, 2010, and are otherwise eligible for COBRA.
  • These “assistance eligible individuals” (AEIs) are eligible for a federal subsidy of 65% of their COBRA premiums, and are 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 is entitled to the subsidy for up to 15 months or until becoming eligible for coverage under another employer’s plan or for Medicare, or until the maximum COBRA coverage period ends, whichever occurs first. No one is eligible for the subsidy BEFORE the date of enactment (February 17, 2009).

Employers are required to notify all individuals who are AEIs and employees who have had a COBRA-qualifying employment termination on or after October 31, 2009, of the new subsidy provisions by February 17, 2010. If qualifying events happen after December 19, 2009, notification must be provided within the regular COBRA notice deadlines.

Employers must provide additional notice to AEIs who continue to receive COBRA coverage, who may have failed to pay their premiums on time during their transition period, or those who paid the full premium. This notice must include information about making retroactive premium payments during the transition period to maintain COBRA coverage. Notices must be sent within the first 60 days of the individuals' transition period. AEIs have until February 17, 2010, or 30 days after they receive the notice, whichever is later, to pay premiums retroactively.

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.

  • 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.

Assistance Eligible Individual (AEI) Attestation and Verification Form (to be completed by the employer) (pdf, 45 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