• Congress Passes One-Month Extension of COBRA Premium Subsidy
  • March 22, 2010
  • Law Firm: Miller Johnson - Grand Rapids Office
  • On March 2, 2010, the U. S. Senate passed, and President Obama signed, the “Temporary Extension Act of 2010,” which, among other things, provides for a one-month extension of the eligibility window for the COBRA premium subsidy from qualifying events occurring on or before February 28, 2010 to qualifying events occurring on or before March 31, 2010. As a result, employers and plan administrators should continue to use the COBRA election paperwork containing information regarding the subsidy for qualifying events occurring through March 31, 2010.

    Additional Extension Likely
    A bill has been introduced in Congress that would extend the premium subsidy through the end of 2010. That bill will hopefully be passed before the end of March, but whether it will pass without modification is unknown at this time. We will be monitoring the status of the bill and will provide updates when appropriate.

    The Extension Act Expands Group Eligible for Premium Subsidy
    In addition to extending the eligibility period for the premium subsidy, the Temporary Extension Act also expands the category of COBRA qualified beneficiaries who are eligible for the premium subsidy. Under the Act, an individual who experienced a COBRA qualifying event that was a reduction in hours (e.g., a change from full-time status to part-time status) that occurred on or after September 1, 2008 and no later than March 31, 2010, that is followed by an involuntary termination of employment occurring on or after March 2, 2010, is now eligible for the premium subsidy on account of the involuntary termination of employment. The premium subsidy applies for periods of coverage beginning on and after the involuntary termination of coverage.

    An individual in this situation who did not elect COBRA on account of the reduction in hours has the opportunity to elect COBRA as of the date of the involuntary termination of employment. The 18-month continuation period is measured from the date of the reduction in hours, but the qualified beneficiary does not have to retroactively elect and pay for coverage for the period between the reduction in hours and involuntary termination of employment. The group health plan may not impose any pre-existing condition exclusions or limitations based on health conditions that arose during the gap in coverage.

    This change requires additional notifications for those qualified beneficiaries who received COBRA election paperwork upon their reduction in hours who are then involuntarily terminated on and after March 2, 2010. The notice must be provided within 60 days of the date of the involuntary termination of employment.

    Clarifications Needed
    There are a number of questions regarding the practical application of these new requirements. For example:

    • If the 18-month continuation coverage period expired before the involuntary termination of employment occurs, is any further action necessary with respect to that qualified beneficiary? (Because the 18-month period is measured from the date of the reduction in hours, it appears that no further action is necessary.)
    • Does the Act require retroactive application where the involuntary termination of employment occurred before March 2, 2010? (It appears that it does not.)
    • For qualified beneficiaries who elected COBRA on account of the reduction in hours is retroactive application of the subsidy required? (It appears that it is not.)
    • If a qualified beneficiary wants to retroactively elect and pay for COBRA coverage between the date of the reduction in hours and the involuntary termination of employment, is the group health plan required to allow him/her to do so? (It appears that is not required.)

    Guidance from the U.S. Department of Labor on these and other issues related to this extension will be welcome and is likely to be forthcoming in the next few weeks.