We've heard a lot in the past week about President Obama's proposed budget, unveiled after his State of the Union speech last Tuesday. Topic number one seems to be how the budget plan would affect the national deficit. Apparently of quite a bit less interest, judging by the limited press it's received, is the proposal to extend the COBRA subsidy through 2010.
It's been reported that the budget proposal would make the subsidy available to those who are involuntarily terminated from March 1, 2010, through the end of the year. These folks would be eligible for up to 12 months of subsidized health care continuation (employees who are involuntarily terminated up until the end of February 2010 are eligible for 15 months of the subsidy, based on the first extension, passed by Congress this past December).
Are people taking advantage of the subsidy? The answer is a resounding yes, according to a survey reported in Business Insurance. Large employers reported that more than twice as many laid off employees have opted to continue their health insurance through COBRA since the subsidy first became available.
If the subsidy extension passes, some state legislatures may have to get on the ball in a hurry. A number of states offer "mini-COBRA" laws, which typically provide the right to continue health insurance to those working for smaller employers (COBRA covers only those with at least 20 employees). These laws differ widely in the details, including what counts as a qualifying event and how long continuation coverage can last. But most of them have this in common: As long as former employees meet the other requirements for the subsidy (for example, they were involuntarily terminated and meet certain income restrictions), they are eligible for the COBRA subsidy, even if they are receiving continuation coverage through a state law rather than through COBRA.
To allow employees to take advantage of the subsidy, a number of states amended their laws -- for example, to give employees who originally passed up continuation coverage a second chance to elect coverage once the subsidy was available. However, some states tied their amendments explictly to the original time frame for which the subsidy was available, and so might have to take legislative action to make sure employees of smaller employers are still eligible if the subsidy is extended.
It's interesting to me that, at a time when health care reform has been described as "on life support," unconscious," or in terms of some other unfortunate medical metaphor, the COBRA subsidy -- which is, after all, government-funded health insurance -- enjoys wide popularity, inside and outside of Cognress.
The health care bill debate seems all consuming. At least in terms of press coverage.
But yesterday, the House of Representatives passed a defense 
spending bill (H.R. 3326) that, according to the DC Employment Law Update: "prevents most defense contractors and subcontractors from forcing their employees or independent contractors to sign, as a condition of employment, agreements to arbitrate certain employment-related claims. The Senate approved this provision ... in October."
The arbitration provision conditions the receipt of a federal defense contract worth more than $1 million on two agreements by the company. Details of the provision can be found here and here.
The bill would also extend the COBRA premium subsidy offered by ARRA from nine to 15 months. In addition, the job lost eligibility date would be revised to February 28, 2010. The bill will now need to be reconciled with the Senate version and back for another vote before going on to the President for signature.
Similar provisions are being introduced in another bill so it seems more likely now that such a measure is going to be a reality before year's end in one way or another.
For now, employers should sit tight on their COBRA documentation. We're likely to see a year end scramble in the next week or so as Congress wraps this up for the year.
Over the weekend, Congress approved of a measure that I reported on last week that will extend COBRA for a few more months.
The President is expected to sign the measure and no doubt the DOL will be updating its website with new information.
Thus, employers should continue to keep tabs on this development as it will affect those who have been laid off this month and will be eligible for COBRA starting 1/1/10.
(H/T Workforce)
So, President Obama signed a bill that extends the COBRA subsidy. No big deal, right?
Well, not exactly.
First, let's go over what's in the final provision:
- The eligibility period to receive the COBRA subsidy has been extended two months -- to February 28, 2010. That means that individuals w
ho have been laid off recently who were going to start on COBRA on 1/1/10 are now eligible for COBRA. - More importantly, the COBRA subsidy period (i.e. the time that individuals can get the government to subsidize part of the cost of the premium) has now been extended to 15 months (up from 9 months.)
- This means that individuals who are currently receiving the COBRA subsidy are eligible to have it continue.
- Individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by (60 days after date of enactment) or, if later, 30 days after notice of the extension is provided by their plan administrator. If such an individual did not pay his or her December, 2009 COBRA premium because the subsidy expired, the individual can re-enroll in COBRA and receive the subsidy for December, 2009 (without any gaps in coverage) and another 5 months until May, 2010.
- Note that unlike the previous COBRA subsidy provision, eligibility to participate is based on those who were involuntarily terminated between 1/1/10 and 2/28/10. (The previous provision was based on the termination date and the date that COBRA was scheduled to begin.)
The Department of Labor has issued a press release but as of the morning of December 22, 2009, it had not yet updated its website with the new notices or information. That information should be available here when posted (hopefully this week.)
Until those new notices come out, employers are left in a little bit of limbo. And employers will have a short time frame to send out new notices.
So, what can an employer do now?
- Compile a list of individuals who are currently receiving the COBRA subsidy. Those individuals are going to need to be informed that the period is going to be extended by 15 months and that to receive the subsidy they will need to continue to pay the premium as they have.
- Compile a list of individuals who were receiving the COBRA subsidy but whose nine months of eligibility had expired. For those individuals, they will need to be informed that they can "re-start" COBRA. Sample notices from the DOL should be available for this purpose in the next few days.
- Compile a list of individuals are COBRA eligible, but who were not going to receive the COBRA subsidy because the time period was going to expire beforehand. This will typically include those who were terminated within the last month, who were likely continuing on the employer's health plan until December 31, 2009. Those individuals will now need to receive new notices that they will be eligible for the COBRA subsidy; again, the DOL should be preparing sample notices in the next few days.
- In the interim, employers may want to send out a letter to all such individuals informing them that changes are on the way and that you will be providing them with updates as they become available. This might keep your HR staff a little less busy answering phone calls and give them some more time to comply with this law.
- Going forward for the next 75 days or so, employers will need to inform those who are laid off that they may be eligible for this COBRA subsidy. Again, those terminated by 2/28/10 will be eligible regardless of when the actual COBRA period is scheduled to begin.
Developments in this area are coming fast and furious and with the end of the year upon us, it couldn't come at a worse time for many. But this is one area that needs focus. And fast.
(H/T Delaware Employment Law Blog)