Volume 6 Number 33 August 14, 2009

Information on COBRA/mini-COBRA and the American Recovery and Reinvestment Act (ARRA)

President Barack Obama signed the American Recovery and Reinvestment Act (ARRA), commonly known as the Stimulus Plan, into law on February 17, 2009. Portions of ARRA provide for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA.

The United States Department of Labor (USDOL) is the federal agency responsible for COBRA and the benefits related to the election of COBRA under ARRA. Their Web site is www.dol.gov. For updated information, please refer to this site and click on the American Recovery and Reinvestment Act Information.

The Centers for Medicare and Medicaid (CMS) is the federal agency responsible for the state continuation (mini-COBRA) benefits under ARRA. For updated information on state continuation, please go to the following Web site: www.cms.hhs.gov/COBRAContinuationofCov and then click on Regulations and Guidance and then on More and then on COBRA Continuation of Coverage under Health Insurance Reform.

Consumer Corner

For entities that have 20 or more employees: Under ARRA, those employees that were involuntarily separated from their job (not for gross misconduct) from September 1, 2008, through December 31, 2009, are entitled to have the federal government subsidize 65% of their COBRA payments. Also eligible for this assistance is the employee’s spouse and dependents who elect COBRA due to the employee’s involuntary separation. This subsidy is taken by the employer directly from the payroll taxes when the separated employee pays 35% of the COBRA premium. Payroll taxes include federal income tax withholding and employee and employer FICA taxes. This subsidy is good for up to nine (9) months. Once a separated employee qualifies, then all other COBRA rules apply. The subsidy is not available to individuals whose income, in the year that they receive the subsidy, exceeds $125,000 or couples filing joint tax returns that exceed an income of $250,000.

For entities subject to State Continuation (less than 20 employees): For information on Florida’s state continuation (mini-COBRA) law, see Florida Statutes 627.6692. Under ARRA, those employees that were involuntarily separated from their job (not for gross misconduct) from September 1, 2008, through February 16, 2009, and elected state continuation when eligible, are entitled to have the federal government subsidize 65% of their state continuation payment. In addition, those employees that were involuntarily separated from their job between February 17, 2009, and December 31, 2009, are also eligible under ARRA. When the separated employee remits 35% of the state continuation premium to the carrier, the carrier will provide the 65% premium subsidy to the separated employee and then receive a tax credit from the federal government. This subsidy is good for up to nine (9) months.

Who does the ARRA apply to? The new law applies to all group health plans that are subject to COBRA and State Continuation, including state and local governments subject to COBRA.

When may eligible individuals receive the subsidy? The subsidy can be applied to premiums for the first period of coverage beginning March 1, 2009. The subsidy is on a going- forward basis and not retroactive.

Who receives the reimbursement? For COBRA, the government reimburses the employer through a reduction in payroll taxes. For state continuation, the insurer is entitled to the reimbursement, through a tax credit, after filing. For Multiple Employer Welfare Arrangements (MEWAs), the plan is entitled to the reimbursement. The new law allows a “grace period” during the first two months of coverage, which provides a two month period for the employer to credit or refund overpaid premiums.

Employer Refusal to Provide Group Continuation Coverage: The new law requires the USDOL to provide an expedited review of any employer’s refusal to allow a worker to elect group continuation coverage and receive the subsidy. Once the denied individual submits an application for review, the USDOL shall make an eligibility determination within 15 business days. If you have questions, contact the USDOL at (866) 444-3272 or visit the agency Web site: http://www.dol.gov/ebsa/COBRA.html. The telephone number for the USDOL at the Plantation Regional Office is: (954) 424-4022.

State continuation appeals, including federal, state, or local government plans, must go to the following address:

MAXIMUS Federal Services, Inc., COBRA Continuation Coverage Assistance Appeals Project, 800 Cross Keys Office Park, First Floor – Suite 820, Fairport, NY 14450

Or FAX: 1-866-941-0170

For additional information, contact Maximus at 1-866-400-6689 or visit its website at www.ContinuationCoverage.net. The application for an appeal is available on the CMS website at http://www.cms.hhs.gov/COBRAContinuationofCov/.

Plans Covered: All group health plans subject to COBRA or State Continuation (as allowed by either state or federal law, respectively) are eligible for the subsidy, including medical, hospitalization, vision and dental plans. Flexible spending accounts are not eligible.

Does the new law extend the length of available group continuation coverage? The new law does not change the length of time that group continuation coverage must be provided to eligible individuals. The subsidy is available for up to nine (9) months, but not longer than the maximum period under COBRA or mini-COBRA.

How can an eligible individual, under ARRA, lose eligibility for the group continuation subsidy? The eligible individual, under this law, can lose eligibility for the group continuation subsidy in two ways: 1. The subsidy lasts no longer than nine (9) months. 2. When the person receiving the subsidy becomes eligible for new group health coverage or Medicare.

Rules: The rules governing eligibility for subsidized COBRA differ from the rules governing eligibility for unsubsidized COBRA. Eligibility for unsubsidized COBRA ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the COBRA subsidy.

Notification: Beneficiaries must notify their former employer when they become eligible for new group health coverage. Those beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110% of the subsidy to the federal government. However, the penalty is not imposed if the beneficiary demonstrates “reasonable cause” for failure to notify.

Is the subsidy considered income for other Income-Based Government Programs? The subsidy will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program.

Additional Information: Please call the Division of Consumer Services Section at 850-413-3089 or 1-877-693-5236 for additional information.

This article was originally issued by the Nevada Division of Insurance. Relevant adaptations have been made for Florida consumers.