Laid-off workers may be eligible for reduction in COBRA premiums

Monday, March 16, 2009

The American Recovery and Reinvestment Act of 2009 (ARRA) provides for a 65% reduction in COBRA premiums for laid-off workers who meet certain requirements. Your former employer is supposed to notify you if you are eligible, but you might want to call your former employer's plan administrator to make sure the notice is on its way.

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires most employers with group health plans to offer employees the opportunity to continue their group health care coverage under their employer's plan for up to 18 months, if their coverage otherwise would stop because they were fired, laid off, or because of some other change in employment status (referred to as "qualifying events").

The new premium assistance can last up to nine months. To qualify, COBRA beneficiaries must meet all of the following requirements:

• Be eligible for COBRA continuation coverage at any time during the period beginning Sept. 1, 2008 and ending Dec. 31, 2009;
• Elect COBRA coverage (when first offered or during the additional election period), and
• Have a qualifying event for COBRA coverage because of involuntary termination during the period beginning Sept. 1, 2008 and ending Dec. 31, 2009.

Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. Other limitations may also apply. There is no premium reduction for periods of coverage that began prior to Feb. 17, 2009.

Under the program, eligible workers will have to pay 35 percent of the premium to their former employers.

Workers who lost their jobs between Sept. 1, 2008, and enactment, but failed to initially elect COBRA because it was unaffordable, get an additional 60 days to elect COBRA and receive the subsidy.

This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy. For eligible individuals, the premium subsidy is not included in your income, so it is not taxable.

Individuals who request treatment as an assistance eligible individual and are denied treatment by their group health plan may have the right to appeal to the U.S. Department of Labor (DOL). The DOL is currently developing a process and an official application form for appeals.

The Employee Benefits Security Administration (EBSA) of the DOL is working to issue additional guidance regarding the COBRA premium reductions. If you want to learn more about eligibility, contact a DOL/ESBA benefits advisor by calling toll free 866-444-3272.

For more information, visit the DOL page on the COBRA extension.