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Understanding the New COBRA

If you do not work in your companies’ human resource, department you are probably unfamiliar with the affect the new stimulus law has on the Consolidated Omnibus Budget Reconciliation Act (COBRA). However, if you are involuntarily terminated between September 1, 2008 ad December 31, 2009 this article will help to decipher new COBRA requirements.

On February 17, 2009, President Obama signed the stimulus law. The stimulus law included federal assistance for workers who lost their group health coverage after involuntary termination. Individuals who qualify as “Assistance Eligible Individual” under the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act) are able to pay a reduced premium equal to 35% of the original COBRA premium for up to nine (9) months.

Here is an example:

The total cost of my group health coverage is $125.82. My employee portion is $27.06; my employer pays the remaining $98.76. If I were involuntarily terminated between September 1, 2008 and December 31, 2009, I could elect COBRA and pay $44.04 up to nine (9) months. Pre-2009 Recovery Act I would have to pay $125.82 plus a 2% administration fee.

The remainder of the premium will be the responsibility of the employer. However, the employer can claim reimbursement for the 65% that they paid once the qualified individual has paid their portion of the premium (35%). Employers will be reimbursed the 65% by claiming the credit on Form 941.

In addition, individuals who were terminated between September 1, 2008 and when the law was enacted, but failed to elect COBRA because it was not affordable, will be given an additional 60 days to elect COBRA and receive the subsidy. If an individual had elected COBRA and subsequently had COBRA terminated for nonpayment of premiums are also entitled to make new elections and take advantage of the premium subsidy.

Individuals are required to notify their group health plan once they become eligible under another health plan. Failure to provide property notification can result in hefty fines.

At this time, only group medical plans are covered under the subsidy program. If your group plan only offers dental, vision, counseling or referral services these (like employee assistance programs) are not covered under the subsidy program. In addition, the subsidy program does not include health care flexible spending accounts.

The information contained in this article is not intended to be construed as legal advice or a legal opinion. Discuss any questions and concerns with your human resource administrator.

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