Printer Friendly Version
COBRA SUBSIDY UPDATE: PRESIDENT SIGNS LEGISLATION EXTENDING AND EXPANDING SUBSIDY
As you know from our prior KZR Alerts, earlier this year Congress passed legislation providing a subsidy for employees losing medical coverage under qualifying conditions. With the subsidy, separated employees are only required to pay 35% of the cost of medical continuation coverage for a period of time, while the employer, or the insurance carrier, pays the balance and then recoups that payment through a payroll tax credit.
Eligibility for the subsidy was scheduled to expire on December 31, 2009. As a result, employees who lost their jobs earlier in December, but whose medical coverage continued through the end of the month, would not be eligible for the subsidy.
Legislation to extend the subsidy, which was previously approved by the House of Representatives, and passed by the Senate on December 19th, was signed into legislation by the President last week. The legislation not only extends eligibility for the subsidy through February 28, 2010, but also extends the subsidy period from 9 months to 15 months both for those already on COBRA and those who are separated through February 28, 2010. Individuals whose subsidy ran out before the date of enactment and who failed to continue coverage at the full cost must be given an opportunity to retroactively reinstate coverage by making payment of the subsidized amount within 60 days of enactment of the legislation (or, if later, 30 days after the required notification is provided). Individuals who paid the full COBRA premium amount will be entitled to a credit. In addition, the legislation clarifies that a qualifying event giving rise to COBRA entitlement must occur within the prescribed period, but not the actual loss of coverage.
Employers should be prepared to notify individuals currently on COBRA of the extended coverage period. Notification of the changes must be given to anyone who was an assistance eligible individual at any time on or after October 31, 2009, or who has a termination of employment on or after that date, within 60 days after the enactment or as otherwise required under the general notification provisions. In addition, individuals whose subsidy period ended before enactment of the extension and who did not timely pay, or who paid the full amount during that interim period, must be provided notice of the extension and the ability to make retroactive premium payments.
