So, President Obama signed a bill that extends the COBRA subsidy. No big deal, right?
Well, not exactly.
First, let’s go over what’s in the final provision:
- The eligibility period to receive the COBRA subsidy has been extended two months — to February 28, 2010. That means that individuals who have been laid off recently who were going to start on COBRA on 1/1/10 are now eligible for COBRA.
- More importantly, the COBRA subsidy period (i.e. the time that individuals can get the government to subsidize part of the cost of the premium) has now been extended to 15 months (up from 9 months.)
- This means that individuals who are currently receiving the COBRA subsidy are eligible to have it continue.
- Individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by (60 days after date of enactment) or, if later, 30 days after notice of the extension is provided by their plan administrator. If such an individual did not pay his or her December, 2009 COBRA premium because the subsidy expired, the individual can re-enroll in COBRA and receive the subsidy for December, 2009 (without any gaps in coverage) and another 5 months until May, 2010.
- Note that unlike the previous COBRA subsidy provision, eligibility to participate is based on those who were involuntarily terminated between 1/1/10 and 2/28/10. (The previous provision was based on the termination date and the date that COBRA was scheduled to begin.)
The Department of Labor has issued a press release but as of the morning of December 22, 2009, it had not yet updated its website with the new notices or information. That information should be available here when posted (hopefully this week.)
Until those new notices come out, employers are left in a little bit of limbo. And employers will have a short time frame to send out new notices.
So, what can an employer do now?
- Compile a list of individuals who are currently receiving the COBRA subsidy. Those individuals are going to need to be informed that the period is going to be extended by 15 months and that to receive the subsidy they will need to continue to pay the premium as they have.
- Compile a list of individuals who were receiving the COBRA subsidy but whose nine months of eligibility had expired. For those individuals, they will need to be informed that they can "re-start" COBRA. Sample notices from the DOL should be available for this purpose in the next few days.
- Compile a list of individuals are COBRA eligible, but who were not going to receive the COBRA subsidy because the time period was going to expire beforehand. This will typically include those who were terminated within the last month, who were likely continuing on the employer’s health plan until December 31, 2009. Those individuals will now need to receive new notices that they will be eligible for the COBRA subsidy; again, the DOL should be preparing sample notices in the next few days.
- In the interim, employers may want to send out a letter to all such individuals informing them that changes are on the way and that you will be providing them with updates as they become available. This might keep your HR staff a little less busy answering phone calls and give them some more time to comply with this law.
- Going forward for the next 75 days or so, employers will need to inform those who are laid off that they may be eligible for this COBRA subsidy. Again, those terminated by 2/28/10 will be eligible regardless of when the actual COBRA period is scheduled to begin.
Developments in this area are coming fast and furious and with the end of the year upon us, it couldn’t come at a worse time for many. But this is one area that needs focus. And fast.