COBRA Subsidy Extended to February 28, 2010

COBRA Subsidy Extended to February 28, 2010

In late December, President Obama signed H.R. 3326, a defense appropriations bill with a provision that extends the COBRA premium subsidy to involuntarily terminated workers until February 28, 2010.

The subsidy, originally from the American Recovery and Reinvestment Act (ARRA) passed in February 2009, was for people who involuntarily lost their jobs between September 1, 2008 through December 31, 2009. The defense appropriations bill extends the timeframe for people to qualify for the COBRA premium subsidy another 2 months. Thus, people who were involuntarily terminated between January 1 through February 28, 2010, may apply for the subsidy. It also extends the amount of time people can receive the subsidy, from 9 to 15 months.

As mentioned in our earlier article, COBRA, the Consolidated Omnibus Budget Reconciliation Act passed in 1985, allows involuntarily laid-off workers to continue their health coverage for 18-36 months by assuming the premium payments formerly paid by their employers. As these health premiums are extremely expensive, ARRA provided a federal subsidy to pay for 65% of a qualifying person’s COBRA premium, making this insurance much more affordable.

In addition to extending the eligibility period and the duration of subsidy benefits, the H.R. 3326 provision to extend the COBRA premium subsidy makes a number of subtler changes in the subsidy program rules. Notably, the provision:

  • Requires a special notice describing the new subsidy provisions to go out to all “assistance eligible individuals” (AEIs) who have been on COBRA on or after November 1, 2009, or whose qualifying event is an “involuntary termination” of employment occurring on or after November 1, 2009.
  • Allows for a 60-day period for the retroactive payment of premiums for “assistance eligible individuals” whose subsidy period expired November 30 and who failed to pay their premium for December coverage.
  • Lets employees who are involuntarily terminated qualify for the subsidy if they were terminated before February 28, 2010, but opted for COBRA coverage that starts after February 28, 2010.

Employers and their benefits advisors have to move quickly to comply with this legislation. The new statute requires employers to send extension letters within 90 days of enactment.

The U.S. Department of Labor’s website has helpful information and updates on the subsidy and extension, including:

Update on California’s Cal-COBRA

While the federal COBRA applies only to businesses with at least 20 employees, the state’s Cal-COBRA program applies to employers with 2 to 19 workers. Last year, California lawmakers passed AB 23 so that the COBRA premium subsidy could also be available to people eligible for Cal-COBRA. Under AB 23, the subsidy’s expiration date was the same as the federal subsidy’s initial expiration date of Dec. 31, 2009. As of now no action has been taken by the state to lengthen the Cal-COBRA premium subsidy program to be aligned with the recent federal extension.

While Gov. Arnold Schwarzenegger’s administration commented that additional legislation would not be necessary to extend AB 23, the Assembly Health Committee, who was given the task to examine this issue late December 2009, has not taken action. Until some action is taken, the subsidy benefit will not be extended for Cal-COBRA recipients from 9 to 15 months, nor will their eligibility period extend beyond December 31, 2009.

For more details on H.R. 3326, see the summary and full text.

See our COBRA and Cal-COBRA sections for general information.

Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.