STIMULUS PACKAGE CONTAINS COBRA SUBSIDY

On February 17, 2009 the President signed into law the American Recovery and Reinvestment Act of 2009.  This law may provide certain individuals you with the opportunity to receive (1) assistance in paying for their COBRA premiums and/or (2) a second chance for electing COBRA coverage even if the individual is not eligible to receive assistance in paying the COBRA premium.  If an individual is eligible for assistance in paying his or her COBRA premium, he or she may only have to pay up to 35% of the monthly cost of his or her premium for group health coverage under COBRA or state continuation coverage.

Who is Eligible for the COBRA Premium Assistance Subsidy?

An individual is eligible for the COBRA Premium Assistance Subsidy if you meet the following conditions:

1)     At any time during the period that begins with September 1, 2008 and ends with December 31, 2009, an individual was involuntarily terminated from employment, other than for gross misconduct with his or her employer and the individual his or her qualified spouse and/or his or her dependent(s) are eligible for COBRA  coverage or state continuation coverage

2)     The individual, his or her qualified spouse or dependent(s) is eligible for COBRA Coverage or state continuation coverage.  The individual cannot be terminated for reasons of gross misconduct.

3)     The qualifying event with respect to the COBRA coverage consists of the involuntary termination of the covered employee’s employment and occurred on or after September 1, 2008 and on or before December 31, 2009.

4)     The individual is currently not eligible for coverage under any group health plan as an employee or dependent (other than coverage consisting of only dental, vision, counseling, or referral services, or a combination thereof), coverage under a health reimbursement arrangement or a health flexible spending arrangement or coverage of treatment that is furnished in an on-site medical facility maintained by the employer and that consists primarily of first-aid services, prevention and wellness care, or similar care (or a combination thereof) or is eligible for benefits under Medicare.

5)     The individual ‘s adjusted gross income for federal tax purposes for the taxable year(s) during which he or she receives this assistance will not exceed $145,000 if the individual is single or $290,000 if the individual is married and filing a joint return. (Note: If you are single and your adjusted gross income is between $125,000 and $145,000 or you are married and filing a joint return and your adjusted gross income is between $250,000 and $290,000, part or all of the individual’s  Premium Assistance Subsidy will be taxable. Please note, if an individual does receive COBRA premium assistance subsidy and have income as detailed above, the amount the individual receives will be included in his or her taxable income for the tax year(s) affected.

Remember if an individual is eligible for the COBRA Premium Assistance Subsidy and elects it, such election will disqualify the individual for the Health Coverage Tax Credit. If an individual is eligible for the Health Coverage Tax Credit, which could be more valuable than the Premium Assistance Subsidy, you will have a notification from the IRS.

Even if an individual is not eligible for the COBRA Premium Assistance Subsidy, may the individual, his or her qualified spouse and/or dependents elect COBRA coverage?

Yes. If an individual was involuntarily terminated from employment from his or her employer anytime on or after September 1, 2008 and before February 17, 2009 and are eligible for COBRA coverage, he or she will an another opportunity to elect COBRA coverage again even if he or she, his or her your qualified spouse and/or dependent(s) waived COBRA coverage in the past.

This special enrollment period may not apply to certain state continuation coverages. An individual should check with his or her employer, COBRA administrator or insurance company of details.

What if an individual did not elect COBRA coverage and his or her initial enrollment period has expired?

The individual, his or her qualified spouse and/or dependent(s) will have 60 days from the date of the Special Enrollment Election Notice to elect COBRA coverage again even if he or she eligible for the COBRA Premium Assistance Subsidy.  An individual, his or her qualified spouse and/or dependents may do so by completing the Special Enrollment COBRA Election Form and returning it to employer or COBRA Administrator specified on the notice.  You must pay the initial COBRA premium within a period of time specified in the Notice.

When will the new COBRA coverage start?

If the individual is eligible, his or her coverage under your employer’s group health plan will be effective the later of the first coverage period after the date of enactment (February 17 2009 (March 1, 2009 for calendar month plans) or the date of the individual’s involuntary termination with his or her employer.

When will the new COBRA coverage end?

The individual COBRA coverage will terminate on the earliest of following events to occur:

1)     18 months after his or her original qualifying event date (or the end of coverage period for the standard extensions of coverage under COBRA such as death of the employee, dependent ceases to be eligible for coverage, you are on Military Leave or you become SSA disabled);

2)     The date the individual is covered under any group health plan,

3)     The first day of the month for which the qualified beneficiary’s COBRA premium is not timely paid;

4)      The date the individual’s employer ceases to maintain any group health plan for its employees.

5)     The individual becomes eligible for Medicare.

What will the COBRA premium be under the COBRA Premium Subsidy and how long can the individual receive it?

If an individual is eligible for the COBRA Premium Assistance Subsidy, he or she will be required to pay up to 35% of the normal COBRA premium for the group health plan coverage in which the individual enrolled in under COBRA.  Failure to make the payment within the payment period specified will result in the automatic termination of the COBRA coverage and the individual will not be able to reinstate it at a later date.

The individual will continue to receive the COBRA Premium Assistance Subsidy until the earliest date to occur:

1)     The individual becomes eligible for coverage under any group health plan (other than coverage consisting of only dental, vision, counseling, or referral services, or a combination thereof), coverage under a health reimbursement arrangement or a health flexible spending arrangement or coverage of treatment that is furnished in an on-site medical facility maintained by the employer and that consists primarily of first-aid services, prevention and wellness care, or similar care (or a combination thereof) or is eligible for benefits under Medicare.

2)     9 months after either the first day of the first coverage period after enactment (February 17, 2009) (March 1 2009 for calendar month plans) or the first month after enactment that the individual becomes eligible for COBRA coverage.

3)     following the expiration of the maximum period of continuation coverage required (i.e. 18 months, 29 months or 36 months) that would normally apply.

If the individual is not eligible for COBRA Premium Assistance Subsidy, he or she will be required to pay 102% of the COBRA premium.  For state continuation coverage, the premium will be 100% of the premium

What Group Health Plans are eligible for the 35% reduction in premium?

The following plans are eligible for the 35% reduction:

1) Medical Coverage

2) Dental Coverage

3) Vision Coverage

4) Employee Assistance Plans (other than referral only plans)

5) Health Reimbursement Arrangements (HRA’s)

Remember, many state continuation coverages only apply to medical coverage.

Note:  Health Care Flexible Spending Account plans are not eligible for this subsidy.

How does an individual apply for the COBRA Premium Assistance Subsidy?

If an individual are currently enrolled in COBRA coverage and his or her involuntary termination date was on or after September 1, 2008 but on or before December 31, 2009:

An individual must complete an Application for COBRA Premium Assistance Subsidy.  Upon acceptance, the individual will be notified of how much premium you will need to remit and when initial payment is due.  Please note, an individual must continue to make your normal COBRA premium payment until he or she is approved for the COBRA Premium Assistance Subsidy.  Upon approval, any overpayment will be credited towards the individual’s future COBRA premiums.

If an individual is not approved, he or she will be notified of the denial and the reason for denial and the amount of the unreduced COBRA premium.

If an individual is not currently enrolled in COBRA coverage and his or her involuntary termination date was on or after September 1, 2008 but on or before February 16, 2009:

An individual must complete the an Application for the COBRA Premium Assistance Subsidy, the Special Enrollment Election Form and he or she will be informed when he or she must submit your initial premium payment

If the individual is not approved for the COBRA Premium Assistance Subsidy, he or she will be notified of the denial and the reason for the denial and the amount of the unreduced COBRA premium.

Please Note:  Failure to provide the proper notification to the designated representative of the employer may result in the individual’s loss of eligibility for the COBRA Premium Assistance Subsidy, but not of continued COBRA coverage.  All requests must be submitted in writing.  No verbal requests will be accepted.

How does an individual apply for COBRA Coverage if he or she is not eligible for the COBRA Assistance Subsidy, but have been involuntarily terminated?

An individual must complete the Special Enrollment Election Form within 60 days from the date of Special Enrollment Election Notice and he or she will be informed when he or she must submit his or her initial premium payment. Please note, COBRA coverage will not be reinstated and claims will not be paid until receive the full initial premium due is received

How does an individual notify the Plan Administrator of his or her or his or her Dependent’s eligibility for coverage under another group health Plan or Medicare after he or she begins to receive the COBRA Premium Assistance Subsidy?

An individual must notify his or her employer or COBRA Administrator in within 30 days of the first date in which he or she or his or her dependent will be eligible for coverage under another group health plan or Medicare.  The individual must do so in writing and include his or her name, the name of any other covered beneficiaries who are also now covered, the name of the employer that is receiving COBRA coverage from, the name of the group health plan that the individual will now be eligible for coverage under and the date he or she is be eligible.

Note:  Failure of an individual to provide notification of his or her eligibility for coverage under another group health plan or Medicare may result in a penalty of up to 110% of the amount of COBRA Premium Assistance Subsidy that the individual did receive.

What happens if the COBRA premiums that the individual is currently paying are already less than 35% of the total COBRA premium?

If an individual is  currently receiving a subsidy from either  his or her employer or any other source such as the Health Care Tax Credit and the subsidy results in your COBRA premium being less than or equal to 35% of the total cost of COBRA premiums, he or she does not need to do anything.  The individual’s premiums will remain the same.

However, if the individual’s current payment agreement ends within 9 months of the date either of coverage after the date of enactment (March 1, 2009 for calendar month plans) or within 9 months of the individual’s COBRA effective date (for involuntary terminations on or after September 1, 2009 but on or before December 31, 2009), the individual may be eligible for the COBRA Premium Assistance Subsidy for the remaining months.

If an individual needs additional information regarding the American Recovery and Reinvestment Act of 2009 or wish to appeal a declined application for the COBRA Premium Assistance Subsidy, he or she can go to: www.dol.gov/COBRA or call 1-866-444-EBSA (3272).

Can an individual enroll in another health plan that costs less money when receiving COBRA coverage?

An employer can decide to allow individuals to select from the current plan(s) available which have a lower monthly premium.  Such individuals will have 90 days from the date of a notice to change his or her current benefit election(s).  The plan with lower premiums may offer less benefits than the individual currently receives.

“Michelle Law” Becomes Law

On October 9, President Bush signed into law (H.R. 2851) which amends the Employee Retirement Income Security Act, the Public Health Act and the Internal Revenue Code by providing that dependent full-time college students who take a medically necessary leave of absence for up to one year will not lose  their health insurance coverage under a new Code Section 9813. This requirement becomes effective for the first plan year beginning on or after October 9, 2009.

This new law is called “Michelle Law” in memory of Michelle Morse who maintained her full-time student load while receiving chemotherapy for colon cancer because she needed the family health coverage and could not afford the necessary COBRA premium to continue her coverage if she dropped out or reduced hours.

This new law will only apply to a group insured or self-insured health plan if the plan provides that for a dependent to continue to be covered after a specified age, he or she must be a full-time student.  For this new law to apply, the dependent child must have been enrolled in a group health coverage on the basis of his or her full-time student status on the date immediately preceding the leave of absence.

A self-funded nonfederal governmental plan can opt out of this new requirement by filing an election with the U.S. Department of Health and Human Services under the same provisions that apply to HIPAA and other federal health benefit laws.