Employee Benefits/COBRA

The stimulus legislation includes several important provisions that affect COBRA continuation coverage and places new requirements on employers. Most notably, certain COBRA beneficiaries may be eligible for a 65 percent discount on their COBRA premiums for a limited period of time. For the new COBRA provisions to be triggered, an individual (referred to in the legislation as an assistance eligible individual) must have been involuntarily terminated from employment during the period from September 1, 2008, to December 31, 2009. The subsidy applies not only to coverage required to be offered under the COBRA rules, but also to similar continuation coverage required under State law for group health plans not subject to COBRA and to Federal or State government-maintained health plans. The reduced COBRA premium applies for a period not to exceed nine months and can terminate earlier. Also, for those individuals who are eligible for the subsidy but who did not originally elect COBRA coverage, or who did elect COBRA coverage and subsequently terminated it, the legislation provides for a new 60-day election period. The usual COBRA notice provided to qualified beneficiaries must now include forms to establish eligibility for the subsidy as well as information about the beneficiary's potential right to the subsidy. Employers who are required to provide subsidized COBRA coverage will be reimbursed for the remaining 65 percent of the premium by treating such amounts as a credit against their liability to the Federal government for payroll taxes. Our attorneys are available to assist clients in learning more about how these COBRA requirements apply to a client's group health plan and in formulating the steps that must be taken to comply. For a more in depth discussion of the COBRA requirements, please click here and here.