The temporary federal COBRA subsidy initially provided by the American Recovery and Reinvestment Act of 2009 was first extended to apply to involuntary terminations of employment through February 28, 2010. Eligibility for the subsidy has now been extended by the Temporary Extension Act of 2010 and the Continuing Extension Act of 2010 (together, the “Acts”) to apply to losses of health insurance coverage in connection with involuntary terminations occurring on or before May 31, 2010, as well as to certain losses of health insurance coverage in connection with a reduction in hours that are followed by an involuntary termination of employment. The rules regarding the subsidy provisions prior to the Acts are summarized in Goodwin Procter’s February 20, 2009 and December 23, 2009 Employee Benefits Updates.
New Extended Eligibility for COBRA Premium Subsidy for Involuntary Terminations
In order to be eligible for the subsidy, an eligible health plan participant’s loss of health coverage must be due to (i) an involuntary loss of employment (other than by reason of gross misconduct) between September 1, 2008 and May 31, 2010 or (ii) a reduction in hours occurring between September 1, 2008 and May 31, 2010 that is followed by an involuntary termination between March 2, 2010 and May 31, 2010. Prior to the Acts, eligibility for the subsidy expired for involuntary terminations of employment after February 28, 2010 and was not available if a reduction in hours was the triggering COBRA event. Covered family members are also eligible for the extension of the subsidy if they lose health insurance coverage due to the employee’s involuntary termination or qualifying reduction in hours followed by an involuntary termination of employment.
Generally Applicable Rules
Other than as described above, the existing rules regarding the amount of, eligibility for and administration of the COBRA subsidy remain unchanged. These rules include circumstances which make an otherwise eligible individual ineligible for the subsidy and provide the mechanism for reimbursement of the subsidy extended by the employer (or the insurance carrier in the case of subsidized state law continuation coverage for small groups). The maximum period of subsidized COBRA coverage remains at 15 months, followed by unsubsidized coverage for up to three more months, for a total of 18 months of COBRA coverage from the date of the COBRA qualifying event.
The Department of Labor (“DOL”) recently published four updated model notices and guidance covering terminations through May 31, 2010, available here. The DOL guidance includes detailed instructions regarding which notices must be provided in various scenarios, as well as the related deadlines. Any employer that has employees who terminated employment on or after September 1, 2008 should review this guidance carefully; in certain cases, new notices will be required for individuals who terminated on or after September 1, 2008.