COBRA Benefits Affected by American Recovery and Reinvestment Act
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (the “Act”), which includes several important changes to COBRA.
COBRA Background
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) amends sections of the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act (PHSA).
How far you go in life depends on your being tender with the young, compassionate with the aged, sympathetic with the striving, and tolerant of the weak and the strong. Because, someday in life you will have been all of those. Anonymous |
COBRA requires group health plans to offer certain individuals, who would otherwise lose their group health plan coverage as a result of a specific qualifying event (such as employment termination or certain changes in family status), the opportunity to continue their group health plan coverage for a specified period of time at applicable group rates.Changes to COBRA
The Act provides for a federal subsidy of 65 percent of the COBRA continuation coverage premiums for qualified beneficiaries receiving COBRA continuation coverage due to the covered employee’s involuntary termination of employment between September 1, 2008, and December 31, 2009. These individuals are referred to as “Assistance Eligible Individuals” or “AEI.”
IMPORTANT: Employers should identify “Assistance Eligible Individuals” as soon as possible so the necessary actions can be taken.
The definition of qualified beneficiary includes:
- the covered employee
- the covered employee’s spouse (as defined by federal law), and
- the covered employee’s dependent children (as defined by the plan)
Qualified beneficiaries have separate election rights under COBRA. Therefore, even if the covered employee does not elect COBRA, a covered spouse or covered child of the involuntarily terminated covered employee will qualify as an AEI.
The subsidy applies to all COBRA-eligible group health plans sponsored by an employer with the exception of health flexible spending accounts offered under a cafeteria plan. This subsidy also applies to healthcare continuation coverage if required by the state. Subsidy Eligibility
1. Qualified beneficiaries that experienced an involuntary termination of employment and subsequently elected COBRA continuation coverage on or after September 1, 2008, but prior to February 17, 2009 (the “Enactment Date”), are eligible to receive the subsidy on a go-forward basis beginning on the enactment date.2. Qualified beneficiaries that experienced an involuntary termination of employment between September 1, 2008, and February 17, 2009 and did not elect COBRA coverage during their initial 60-day election period must be provided another opportunity to elect COBRA coverage during a second 60-day election period. This second election period also applies to those individuals who elected COBRA coverage but have subsequently lost that coverage prior to the enactment date (e.g., due to non-payment of premiums).
If these AEIs elect COBRA continuation coverage, their coverage will extend back to the enactment date. However, the maximum COBRA eligibility period is measured from the original qualifying event date (i.e., the date of the involuntary termination of employment).
Specializing in Health Insurance Benefits R. Kashmiry & Associates is a certified broker for Anthem Blue Cross and Blue Shield in handling the Medicare Advantage and Blue Medicare Rx plans. We believe all employers and employees ought to be able to get the same quality health care benefits and affordable rates available to big companies. If you have questions or comments, drop us an email |
|
NOTE: Any gap in coverage between the date coverage is lost and the enactment date will not be considered a break in coverage for purposes of HIPAA’s pre-existing condition exclusion rules.
Income Limitations
Individuals with modified adjusted gross income that exceeds $250,000 (for joint return filers) or $125,000 (for all other filers) are not eligible for the full premium subsidy. However, they may be eligible for a portion of the subsidy Individuals earning between $125,000 and $145,000 (between $250,000 and $290,000 for joint return filers) will have their income tax increased by a percentage of their total COBRA subsidy received in that year Individuals earning more than $145,000 ($290,000 for joint return filers) will have their income tax increased by the total amount of COBRA subsidy they receive. Right to Waive Subsidy
Because any portion of a subsidy an individual receives but is not eligible for must be reported on the individual’s income tax return, employers and insurers may treat all AEIs as eligible for the subsidy regardless of their income level. However, these individuals have the right to waive the subsidy and pay the full COBRA premium required.How the Subsidy Works
As noted above, the federally provided COBRA subsidy is 65 percent of the amount owed by AEI. A payment made by the AEI equal to 35 percent of the applicable premium is considered payment in full. The remainder must be paid by the employer, plan or insurer and will be subsequently reimbursed by the government through payroll tax credits.NOTE: The 65 percent COBRA subsidy applies to the AEIs’ total premium responsibility, including any other subsidies not affiliated with the Act. However, the employer, plan or insurer will only receive federal reimbursement of the 65 percent paid by reason of the Act.
|
Assistance Eligible Individuals are entitled to receive the subsidy for up to nine months.
However, if an AEI becomes eligible for other group health coverage or Medicare, or reaches the end of his or her maximum COBRA coverage period, his or her entitlement to the subsidy ends.Any AEI who becomes eligible for other group health coverage or Medicare must provide timely written notice that he or she no longer qualifies for the COBRA subsidy. Failure to do so is punishable by a penalty equal to 110 percent of the subsidy received after becoming eligible for other coverage. Electing Other Coverage
The Act allows employers to offer AEIs the option to change their health insurance coverage when making a COBRA election under the employer’s plan.This new coverage option must have the same or lower premiums and must be available to similarly situated non-COBRA employees under the plan. If the employer chooses to offer this option, an AEI must elect to change his or her coverage within 90 days of receipt of the COBRA election notice. This provision is optional and an employer is not required to make this option available. New Notice Requirements
The Act requires employers to modify their COBRA election notices or provide separate, supplemental notices to all individuals who become entitled to elect COBRA continuation coverage during the period beginning on September 1, 2008 and ending on December 31, 2009.These notices must include all of the following:
An explanation of the eligibility requirements for the COBRA subsidy The name, address and phone number of the plan administrator if the individual has questions or requires more information A description of the qualified beneficiary’s obligation to notify the plan if he or she becomes eligible for coverage under another group health plan or Medicare, and a description of the penalty for failure to notify the plan A description of the qualified beneficiary’s right to a reduced premium and any conditions on entitlement to the reduced premium A description of the election of different coverage option described above (if the employer chooses to offer this option to AEIs) This overview is provided for your information only. If you need legal advice, you must seek the opinion of a qualified attorney.
Those COBRA-qualified beneficiaries who were involuntarily terminated between September 1, 2008, and February 17, 2009, must be issued a revised notice including the information outlined above within 60 days of the enactment date. These notices must also describe the second 60-day COBRA election period and explicitly state that the maximum COBRA coverage period is still measured from the date of the original qualifying event.
The Act requires the Department of Labor, Treasury, and the Department of Health and Human Services to work together to provide a model notice within 30 days of the enactment date. Because employers have a 60-day period in which to provide the revised notices, some employers may choose to wait until the model notices have been issued before revising their own notices.
Guidance Pending
It is important to note that although the American Recovery and Reinvestment Act is now law, there is still important guidance forthcoming.
We hope we offered a few helpful tidbits today. Our goal is to say what we mean - and mean what we say.
If you have questions or comments, drop us an email, info@rkashmiry.com, or phone, 877.860.6295.
Please feel free to forward this eNewsletter to anyone who might find it useful.
Remember, it's all
"Just For The Health Of It!"
