As predicted, the federal government extended the COBRA subsidy on March 2, 2010. The Temporary Extension Act of 2010 results in a continued COBRA premium subsidy to American workers who are unemployed through no fault of their own. In addition, the act extends the subsidy from 9 months to 15 months for many affected workers.
The COBRA subsidy extension applies to employees who are involuntarily terminated between September 1, 2008 and March 31, 2010.
Under a new provision of the COBRA subsidy, workers who are terminated involuntarily on or after March 2, 2010 are eligible if that termination follows a qualifying event that was a reduction of hours. The qualifying event must have occurred between September 2, 1008 and March 31, 2010. For example, if an employee’s hours were reduced in November 2009 and he is subsequently laid off after March 2, 2010, he will qualify for the COBRA premium reduction.
The current premium reduction lasts for 15 months and applies to employees who were laid off on or after February 17, 2009. Some of these employees have already had the COBRA subsidy for 9 months. For those employees, the new act allows for a 60-day “transition period” when the workers must be notified of the continued availability of benefits and given additional time to pay. Employers with questions about these requirements should consult the Frequently Asked Questions on the COBRA Premium Reduction Extension Provisions on the EBSA website at www.dol.gov/cobra.
Individuals who lost their subsidy and paid the full 100 percent premium for December 2009 should contact their plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the overpayment.
As with the previous COBRA premium reductions, employers must face a new round of worker notification.
Under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA, employees with group health insurance can continue coverage during periods of unemployment. Usually employees must pay 102% of the total monthly premium for their group health insurance, including any amount previously paid by the employer.
However, the COBRA premium reduction permits eligible persons to pay just 35% of the total premium. The employer pays the remaining 65%, and is reimbursed by the federal government when filing quarterly payroll taxes.