COBRA

COBRA Extension On Hold

The 4th extension of the COBRA premium subsidy was not passed prior to the summer recess beginning August 2010. It is unclear at this point in time whether Congress will consider a longer extension of the COBRA premium subsidy. There are currently two separate bills before Congress that each propose to further extend the COBRA subsidy. The Democrats’ initial proposal -- contained in a larger tax extenders bill -- would have lengthened the eligibility window through November, offering the same 15 months of benefits to those enrolling before then. House Democrats, however, balked at the $8 billion pricetag, leading party leaders to pull the provision from their version of the tax bill.

Aiming to prevent a similar scenario in the Senate,  Senators Casey and Brown on Thursday scaled back their proposal, keeping the Nov. 30 deadline, but cutting the benefit window down to six months. The lawmakers also offered an offset, proposing to eliminate the advance earned income tax credit, which allows low-income taxpayers to receive an early rebate. The provision would save an estimated $1.5 billion, leaving $2.6 billion in deficit spending.

In the meantime, employers and plan administrators should:

1. Update COBRA Notices and group health plan communication materials to include information regarding the extension of the subsidy eligibility period through May 31, 2010.
2. Monitor the Department of Labor website for updated model COBRA notices. Employers and plan administrators can then tailor the updated model COBRA notices to meet the administrative procedures and other requirements of the group health plan.
3. Identify all employees who were involuntarily terminated between April 1, 2010 and April 15, 2010. With respect to these individuals, provide an updated COBRA Notice notifying them of the extended eligibility period and their special election period on or before June 14, 2010.

Enacted on March 2, 2010, the Temporary Extension Act ("TEA") extended eligibility for the 65%, 15-month COBRA premium subsidy to employees that are involuntarily terminated through March 31, 2010. The TEA also amended the definition of assistance - eligible individuals to include individuals that experience a loss in group health plan coverage due to a reduction in work hours, and are subsequently involuntarily terminated from employment. In response to the TEA, the DOL updated two of its existing model COBRA notices and published several new model COBRA notices. The following updated and new model COBRA notices are available for download from the DOL website that is dedicated to COBRA and the COBRA premium subsidy: http://www.dol.gov/ebsa/COBRA.html. 

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