If you've recently lost your job, you may be wondering about the new COBRA subsidy and your health coverage.
Here's what you need to know:
The 65% federal COBRA premium subsidy is available to Assistance Eligible Individuals - employees and enrolled spouses and dependent children who:
- became eligible for COBRA continuation coverage (or for equivalent coverage) as a qualified beneficiary due to a voluntary termination of employment on or after September 1, 2008 through December 31, 2009
- are not eligible for another group health plan through a second employer or a spouse, Medicare or Medicaid
- elect the available COBRA coverage
More about qualifying per current IRS and DOL opinion (subject to change):
The definition of involuntary termination can be unclear in some situations. For example, an involuntary reduction in hours does not count as involuntary termination, unless the reduction is to zero hours. However, a voluntary early retirement or resignation may count as involuntary termination if a layoff is the alternative. If your plan declines your application as an Assistance Eligible Individual (AEI) you can appeal the decision. Visit the DOL COBRA website for current details.
Note for domestic partners and caretakers: Other persons in the terminated employee’s household who are not a legal spouse or dependent child are not Assistance Eligible Individuals even if they are entitled to COBRA coverage under the employee’s COBRA coverage. The subsidy will only apply to any qualified beneficiaries’ premiums.
Each qualified beneficiary has separate COBRA rights.
The ARRA subsidy:
- is 65% of the individual's COBRA premium contribution
- applies to medical, dental, vision and health reimbursement arrangements
- does not apply to "cafeteria plan" flexible spending accounts
- lasts up to 9 months while eligibility is maintained
- does not affect underlying COBRA rules and time periods
- begins the first coverage period after enactment of the ARRA (usually March 1) or the qualifying event, whichever is later
- is reimbursed to the employer or health plan through a payroll tax credit
- if the employer is otherwise subsidizing coverage, the subsidy will be 65% of any individual’s premium contribution – for a 100% employer subsidy, the ARRA subsidy is 0%
- has to be repaid in part by individuals with annual income at or above $125,000 (single taxpayer) or $250,000 (joint returns) up to $145,000 (single) or $290,000 (joint), at or above which it must be repaid in full
- includes a special "second chance" election period for eligible individuals whose qualifying event was between September 1, 2008 and February 16, 2009, who did not originally sign up for COBRA and those who signed up but subsequently dropped coverage
About State Continuation Coverage
States with comparable continuation coverage are working on making the federal subsidy available to eligible individuals from small employer group plans. In California
What to do
You will be sent notice forms from your employer, your health plan or your employer's COBRA administrator by April 18, 2009. You will have 60 days to enroll. We recommend enrolling as soon as possible.
Losing Eligibility
If you later become eligible for a group plan and do not notify your employer, health plan or COBRA administrator, you could be subject to a fine of 110% of the subsidy amount.
For detailed information on the ARRA and COBRA, visit the US Department of Labor website. You will find links to related information from the IRS and any other relevant departments.
Read what to expect when transitioning to COBRA coverage.
Information posted here copyright Shargel & Co. Insurance Services. Please feel free to reproduce with proper credit to Susan Shargel, and include a link to http://insuranceinsights.shargel.com
Comments