COBRA Subsidy Extended

December 23, 2009

Legislation enacted by Congress and signed by President Obama on December 21, 2009, extends the ARRA COBRA premium reduction eligibility for two months, from December 31, 2009 to February 28, 2010, and increases the maximum period for receiving the subsidy to a total of 15 months instead of 9 months. 

With the new changes, the law provides that the 65% premium subsidy for COBRA continuation health benefits is available to individuals who are eligible for COBRA as a result of an involuntary termination between September 1, 2008 and February 28, 2010. The law previously required that both the involuntary termination and the eligibility for COBRA coverage occur before the last effective date of the subsidy, but now only the involuntary termination need take place on or before February 28, 2010, not the COBRA eligibility.

Last month, when we posted on the duration of the COBRA ARRA subsidy, we noted that legislation was introduced to extend the deadline for eligibility as well as the duration of the subsidy. The change enacted this month was not a result of passage of the October legislation but rather changes added to the Department of Defense 2010 Appropriations Act.

Plan administrators must provide notice of the new extension rights to those who became assistance eligible individuals on or after October 31, 2009, or who were involuntarily terminated after October 31, 2009. It is anticipated that regulations specifying the content of the notices will be promulgated, but such notices need to be provided by February 19, 60 days from the effective date of the COBRA subsidy extension legislation. 

It appears that beneficiaries whose subsidy expired and who didn’t pay the full premium, now may have the opportunity to receive retroactive subsidized coverage. In addition, beneficiaries who did pay the full COBRA premium can be refunded by the employer or receive an offset against future COBRA premiums. 

This bill was signed with little fanfare, however, the United States Department of Labor has posted a news statement on their website.