In late December, President Obama signed H.R. 3326, a defense appropriations bill with a provision that extends the COBRA subsidy to involuntarily terminated workers until Feb. 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 2008 through December 31, 2009 and would last a period of 9 months. This bill extends the timeframe for people to qualify for the COBRA subsidy another 2 months and extends the amount of time people can receive the subsidy 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, the federal subsidy pays 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 COBRA subsidy extension provision makes a number of subtler changes in the subsidy program rules. The provision will:
- Require 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 Nov. 1, 2009, or whose qualifying event is an “involuntary termination” of employment occurring on or after Nov. 1, 2009.
- Allow for a 60-day period for the retroactive payment of premiums for “assistance eligible individuals” whose subsidy period expired Nov. 30 and who failed to pay their premium for December coverage.
- Let employees who are involuntarily terminated before Feb. 28, 2010, but get COBRA coverage that starts after Feb. 28, 2010, qualify for the subsidy.
Employers and their benefits advisors will 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, the U.S. Department of Health and Human Services, and the Internal Revenue Service may all issue guidance concerning the subsidy extension.
Update on California’s Cal-COBRA
While the federal COBRA subsidy only applies to businesses with at least 20 employees, last year California lawmakers passed AB 23, a measure that expanded the state’s Cal-COBRA program to employers with 2 to 19 workers.
Lawmakers wrote AB 23 to align with the federal subsidy’s initial expiration date of Dec. 31, 2009, but the state likely will lengthen the Cal-COBRA program to conform with the recent federal extension.
Gov. Arnold Schwarzenegger’s administration doesn’t think additional legislation will be necessary to extend AB 23; the Assembly Health Committee will examine the issue.
For more details on H.R. 3326, see the summary and full text.
See our COBRA and Cal-COBRA sections for general information.