The Consolidated Omnibus Budget Reconciliation Act (COBRA) from 1986 provides continuation of group health coverage that would otherwise be terminated, such as when a person’s employment is involuntary terminated.
While the idea of continuing group health coverage is great, the financial ability for the person laid-off often prohibits maintaining the coverage. Generally, an employer subsidizes the actual premium cost for the employee’s participation in the group plan, which lessens the employee’s premium contribution. However, when a person is offered continuation coverage after termination, it is at the full rate, which is unexpectedly high for the individual.
Considering the current economic and unemployment realities, the Federal government stepped in to offer qualifying COBRA recipients federal subsidy last year. The American Recovery and Reinvestment Act of 2009 (ARRA) allowed those who had participated in their employer’s group health program and who were involuntarily terminated between September 1, 2008 through December 31 2009, to receive COBRA continuation coverage by paying only 35% of the COBRA premium charged to the plan for a period of 9 months, so long as the recipient remains qualified.
Effective January 2010, the COBRA subsidy offer is extended as part of the Department of Defense Appropriations Act, 2010. The extension allows qualifying COBRA recipients to continue to pay only 35% of the premium for an additional 6 months, and allows those who were involuntarily terminated from September 1, 2008 to February 28, 2010 to participate.
Timely election of COBRA coverage is a requirement to participate, which is why employers and group insurance program Plan Administrators are under specific guidelines for notifying eligible individuals.
“The 2010 Act creates a “transition period” for certain individual who exhausted the 9 months of subsidized coverage originally granted under ARRA. An individual who lost or dropped COBRA coverage due to exhaustion of the premium subsidy can pay subsidized premiums for retroactive coverage during the transition period. These payments must be made by the later of (1) February 17, 2010, (2) 30 days after the Plan Administrator provides notice of the COBRA subsidy extension, or (3) the end of the applicable grace period (usually 30 days). Individuals in a transition period who continued their COBRA coverage by paying the full premium are entitled to a refund or a credit against future payments,” according to Ryan T. Chieffo, an Associate of Perkins Coie Legal Counsel.
If you believe you may qualify for the COBRA subsidy program, contact your Plan Administrator to inquire. More information can be found at the Federal Department of Labor web site: www.dol.gov/COBRA
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