Feb 17, 2009

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Notice: The ARRA COBRA Subsidy

The Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) requires covered employers to permit certain individuals who endure a qualifying event, to continue to receive benefits/coverage under the employer-provided health plan for a given period of time.  This is often referred to as “continuation coverage.”

Employers can, and generally do, charge former employees and/or their dependents up to 102% of the premium that the employer would have paid for the coverage had the individual and/or his dependents continued to be covered by the plan. In addition to multiple other notices employers are required to provide with respect to COBRA, employers must provide notice of the availability of COBRA to each covered employee at the time of termination of employment.

The American Recovery and Reinvestment Act of 2009 (ARRA), which the President signed into law this afternoon, provides for a 9 month, 65% subsidy for COBRA premiums for coverage periods beginning on or after March 1, 2009, for those individuals who lost/lose their jobs between September 1, 2008 and December 31, 2009.

Employers must provide notice to all former employees and their dependents to whom this subsidy is available.  In other words, employers must provide additional notice to those former-employees who were already laid off and already provided the “regular” COBRA Notice.

Consistent with current COBRA requirements, the subsidy will no longer be available to individuals who become eligible under another health plan, and the subsidy is not available to individuals with annual income exceeding $145,000 and couples with income exceeding $290,000.