2. Employers Prepare for Surge in COBRA Enrollees
Employers will have to scramble to comply with federal legislation providing a 65 percent subsidy of COBRA health insurance premiums to laid-off employees laid off betwee September 1, 2008 and December 31, 2009.
Dear Workforce: How Does the Stimulus Bill Change COBRA Provisions?
The most notable development: It provides a temporary subsidy that covers 65 percent of the COBRA premium charged to former employees for up to nine months if the employee was involuntarily terminated and the event occurred on or after September 1, 2008, and before December 31, 2009.
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Dear Workforce:
What do employers need to do to tell employees about the new COBRA provision of
the stimulus law? What are the administrative issues that employers will face?
—Struggling to Grasp It All, benefits coordinator, manufacturing, Illinois
Dear Struggling to Grasp:
The American Recovery and Reinvestment Act of 2009, enacted by Congress on
February 17, 2009, provides a temporary subsidy that covers 65 percent of the
COBRA premium charged to former employees for up to nine months if the employee
was involuntarily terminated and the event occurred on or after September 1,
2008, and before December 31, 2009.
Employer-funded health plans must explain the availability of the premium
subsidy when they give COBRA election materials to qualified beneficiaries who
lose coverage before 2010, and to those who had a qualifying event on or after
September 1, 2008, whether or not they had elected COBRA at that time.
Notice must be provided to these individuals by April 18, 2009. The Labor
Department is directed to provide model notices no later than March 17, 2009.
Plan sponsors should start planning for compliance with the COBRA premium
assistance program because implementation is required almost immediately. Unlike
earlier targeted subsidy programs, the group health plan, rather than the
individual, will have the burden of determining who is eligible and, therefore,
who can maintain COBRA coverage by paying only a portion (35 percent) of the
regular COBRA premium.
Plan sponsors should:
Determine how to identify individuals whose
qualifying event was triggered by involuntary termination. Although
loss-of-plan eligibility due to a reduction in hours or voluntarily quitting
a job are also qualifying events that entitle people to COBRA, the subsidy
does not appear to be available in those circumstances.
Identify qualified beneficiaries whose health
plan coverage terminated after August 31, 2008, including those who did not
elect COBRA. The employer will need to notify them about the new election
and subsidy options.
Modify existing COBRA election notices to
include information regarding the premium assistance subsidy and, if
applicable, new coverage elections (employers may allow these individuals to
select a cheaper coverage within 90 days of the notice).
Prepare to report supporting information to
the government to document the premium assistance amount they are requesting
and confirm that the qualified beneficiaries for whom the premium assistance
is sought meet the eligibility standards.
Review their processes for determining and
paying payroll taxes to be able to modify them as needed to receive the
subsidy payments, and review the revised Form 941 and instructions that
provide information on the COBRA subsidy.
Effective for the first period of coverage after February 17 (generally March
2009), the subsidy is available to any COBRA qualified beneficiary who elects
COBRA coverage and whose qualifying event is related to involuntary termination
of employment that occurs between September 1, 2008, and December 31, 2009.
The subsidy is phased out for couples with income above $250,000 and is not
available if income tops $290,000 ($125,000-$145,000 for singles).
SOURCE: Kathryn Bakich, senior vice president and national director of health
care compliance, the Segal Co., Washington, D.C., March 2, 2009
The information contained in this article is intended to provide useful
information on the topic covered, but should not be construed as legal advice or
a legal opinion. Also remember that state laws may differ from the federal law.
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Dear Workforce:
Dear Struggling to Grasp:
