COBRA Premium Reduction Subsidy Extended

Basics:


• COBRA for laid-off workers and their covered dependents:
originally ended at those affected by 12/31/09 is now extended
to those workers affected by 2/28/10


• In addition, the subsidy period has been extended from 9 months
to 15 months of the COBRA 18-month entitlement period.


• The extension was part of the Department of Defense
Appropriations Act, 2010, and was passed and signed into law on
December 19, 2009.

• The extension eliminates the requirement that the loss of coverage occur
before the subsidy’s eligibility expiration date and instead requires only
that the covered employee and dependents experience a qualifying
event because the covered employee’s employment ended as a result of
an involuntary termination between September 1, 2008 and February
28, 2010.

• According to a recent survey by Hewitt Associates, elections increased to 38%
after the subsidy became available. The Hewitt survey estimates that the average
employee would pay $8,800 a year for COBRA coverage, so the 65%
subsidy reduces that cost significantly to about $3,000. The extension of
the subsidy likely will encourage even more people to elect coverage.


Employer’s To-Do:

• The extension also includes new notice requirements to alert assistance
eligible individuals about the extensions.

• It contains a provision allowing assistance eligible individuals to reinstate their COBRA
coverage at the continued subsidized rates and to reinstate the coverage
retroactively if their original nine-month subsidy had expired and they
dropped COBRA coverage instead of paying the full COBRA premium.

• Be aware that individuals who received the nine months of premium reduction
provided originally and then paid the full COBRA premium can receive
refunds and/or premium credits for the extra amount paid.


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