March 20, 2009
COBRA Subsidy Update: Model Notices Available
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “Act”). The Act makes COBRA more affordable and accessible to terminated workers through three key measures. First, the Act offers a 65% COBRA premium subsidy for up to nine months for workers who are involuntarily terminated between September 1, 2008, and December 31, 2009 and who elect COBRA. Second, if an employer offers more than one coverage option, the employer may allow the terminated worker to change his or her enrollment option (i.e., to a plan option with more affordable premiums). Third, employees who lost coverage on or after September 1, 2008, but who did not make a timely COBRA election, or who allowed COBRA coverage to lapse, are provided an extended opportunity to elect (or re-elect) COBRA.
Not all COBRA “qualified beneficiaries”1 are entitled to take advantage of the premium assistance and plan enrollment changes. Rather, a qualified beneficiary is eligible if he or she is an “Assistance Eligible Individual,” defined in the Act as a COBRA qualified beneficiary who:
- becomes eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment of the covered employee; and
- actually elects COBRA coverage.
The extended COBRA election period, however, is available to any individual who did not have a COBRA election in effect on February 17, 2009, but who would have been an Assistance Eligible Individual if he or she had made a COBRA election.
The Act requires that notice of the new rights be provided to Assistance Eligible Individuals as well as certain other qualified beneficiaries. Model notices are now available on the United States Department of Labor web site, and may be accessed at http://www.dol.gov/ebsa/COBRAmodelnotice.html.
The Act requires the following notices:
- All qualified beneficiaries, not just Assistance Eligible Individuals, who experience a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event, must receive information on the premium reduction as well as information required in a COBRA election notice. This notice should be provided within the time periods required for distribution of COBRA election notices under federal COBRA law.
- Assistance Eligible Individuals who had a qualifying event at any time from September 1, 2008 through February 16, 2009, and either did not elect COBRA continuation coverage, or who elected but subsequently discontinued COBRA, must receive information on the additional election opportunity, as well as premium reduction information, no later than April 18, 2009.
The Act’s provisions are discussed in more detail in our Alert issued on February 18, 2009, which is available here.
Endnotes
1 COBRA “qualified beneficiaries” include employees as well as their spouses and dependent children.
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