What is COBRA?

How does the American Recovery and Reinvestment Act of 2009 (ARRA) affect my COBRA benefits?

Who is eligible for reduced COBRA premiums?

Is every "assistance eligible individual" qualified for the reduced COBRA premiums?

How much of my premium will be reduced?

Who pays the other 65% of the premium?

Will my premiums be reduced for the entire 18 months that I am on COBRA?

When does this "Special COBRA Election Period" begin?

What is COBRA?

COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985. This federal law allows terminated employees and their dependents who may lose group health care coverage because of termination of employment, death, divorce, or other life events to continue the group coverage for specified periods of time usually 18, 29 or 36 months. The law applies to group health coverage provided by employers with 20 or more employees, but does not apply to federal employees or church-sponsored plans. The eligible person must pay the premium for this continuation of coverage.

Employers must notify plan administrators of a qualifying event within 30 days after an employee's death, termination, reduced hours of employment or entitlement to Medicare.

A qualified beneficiary must notify the plan administrator of a qualifying event within 60 days after divorce or legal separation or a child's ceasing to be covered as a dependent under plan rules.

Plan participants and beneficiaries must be sent a COBRA election notice within 14 days after the plan administrator receives notice that a qualifying event has occurred.

The individual then has 60 days to notify the administrator of the insurance plan if you wish to elect the COBRA continuation of coverage. The individual has 45 days after electing the coverage to pay the initial premium.

How does the American Recovery and Reinvestment Act of 2009 (ARRA) affect my COBRA benefits?

The American Recovery and Reinvestment Act of 2009 (ARRA) provides for premium reductions and additional election opportunities for health benefits under COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to 9 months.

Who is eligible for reduced COBRA premiums?

The premium reduction for COBRA continuation coverage is available to "assistance eligible individuals". An "assistance eligible individual" is the employee or a member of his/her family who:

·    is eligible for COBRA continuation coverage beginning at any time between September 1, 2008 and December 31, 2009;
·          elects COBRA coverage; and
·       is eligible for COBRA as a result of the employee's involuntary termination between September 1, 2008 and December 31, 2009.

No.  Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction.
In addition, there are income limitations.  If an individual's modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium reduction during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium reduction that must be repaid is reduced proportionately. Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits.

How much of my premium will be reduced?

Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit.

The premium reduction (65 percent of the full premium) is reimbursable to the employer, insurer or health plan as a credit against certain employment taxes. If the credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the employer, insurer or plan for the excess.

NO, ARRA only allows for a maximum of 9 months of reduced premiums. The premium reduction applies to periods of coverage beginning on or after February 17, 2009. A period of coverage is a month or shorter period for which the plan charges a COBRA premium. The premium reduction starts on March 1, 2009 for plans that charge for COBRA coverage on a calendar month basis. The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 9 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare.

When does this "Special COBRA Election Period" begin?

This election period begins on February 17, 2009 and ends 60 days after the employer or plan administrator provides the required notice to the employee.

No. This special election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months from the employee's involuntary termination). COBRA coverage elected in this special election period begins with the first period of coverage beginning on or after February 17, 2009 and ends after 9 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first.

There is no premium reduction for premiums paid for periods of coverage prior to February 17, 2009.

NO.  If you lose coverage because you divorce from the eligible employee, or the eligible employee dies which causes you to lose your coverage or if you lose your "dependent" status under the group health plan because of your age you are eligible to elect COBRA but you will not be eligible for the reduced premium under ARRA.

However, if the employee dies after an involuntary termination occurs and COBRA was elected by the employee before their death, you may be entitled to the premium reduction for the remainder of the 9 month period that would have been available to the employee.

You are not eligible for the ARRA premium reduction program.  The program only applies to people eligible for COBRA as a result of the employee's involuntary termination between September 1, 2008 and December 31, 2009.

If an employer offers additional coverage options to active employees, the employer may (but is not required to) allow assistance eligible individuals to switch the coverage options they had when they became eligible for COBRA. To retain eligibility for the ARRA premium reduction:

• The premium for the different coverage must be the same or lower than the coverage that was in place when COBRA enrollment took place;
• The different coverage must also be offered to active employees; and
• The different coverage must not be limited to only dental, vision, counseling, a flexible spending account, or coverage for treatment that is furnished in an on-site medical facility maintained by the employer.

Plan administrators must provide notice about the premium reduction to individuals who have a COBRA qualifying event during the period from September 1, 2008 through December 31, 2009. Plan administrators may provide notices separately or along with notices they provide following a COBRA qualifying event. This notice must go to all individuals, whether they have COBRA coverage or not, who had a qualifying event from September 1, 2008 through December 31, 2009.
Individuals eligible for the special COBRA election period also must receive a notice informing them of this opportunity. This notice must be provided within 60 days following February 17, 2009.
You must enroll in COBRA coverage and fill out the premium reduction enrollment forms that are provided by your health plan administrator. 

Individuals who are denied treatment as assistance eligible individuals and thus are denied eligibility for the premium reduction (whether by their plan, employer or insurer) may request an expedited review of the denial by the U.S. Department of Labor. The U.S. Department of Labor must make a determination within 15 business days of receipt of a completed request for review.

COBRA and the ARRA do not apply to plans sponsored by employers with less than 20 employees. In Michigan, you are entitled to convert your employer provided group coverage to an individual plan with the same carrier that provides the employer group coverage or you can look for an individual plan with another carrier. 

No, Michigan does not have any statutes that would provide COBRA like benefits to employees of employers with less than 20 employees and therefore an extension of the ARRA reduction in COBRA premiums is not available in Michigan.

You are not eligible for COBRA or the ARRA premium reduction program.

The ARRA only applies to persons who lost insurance coverage due to involuntary unemployment between September 1, 2008 and December 31, 2009. 

It might.  Contact the administrator of your health plan to ask for an explanation of the status of your plan or benefits.  If the employer plan ceases to exist, your COBRA coverage will cease.  Your employer or its health plan administrator is the best place to find out if there is a COBRA plan available.  Questions you will want to ask include:

• Will the employer health plan continue?
• Who will be acting as the administrator of the health plan?
• Will COBRA continuation coverage be offered to terminated employees?

Their toll free hotline number is:  1-866-444-3272
You can send a question electronically at:  www.askebsa.dol.gov
You can visit their website at:  www.dol.gov/COBRA