Jerry Geisel, Business Insurance

WASHINGTON — Congressional action extended a COBRA premium subsidy law which means more work for employers.

Ending weeks of uncertainty, Congress gave final approval and President Obama signed into law late last month a Department of Defense spending bill that includes provisions extending COBRA premium subsidies.

Under the measure, H.R. 3326, the nine-month 65% premium subsidy — established by an economic stimulus measure Congress passed early last year–would be extended by six months to 15 months for employees involuntarily terminated from Sept. 1, 2008, through Dec. 31, 2009.

In addition, workers who lose their jobs through Feb. 28, 2010, would be eligible for the 15-month subsidy. Without an extension, employees who lose their jobs after Dec. 31, 2009, would not have been eligible for the subsidy.

More work for Employers and Their COBRA Administrators

For example, many employers in late November began sending bills to COBRA beneficiaries whose eligibility for the subsidy ran out, asking beneficiaries to pay the full December premium rather than 35% of the premium.

Those employers now will have to calculate the overpayments and decide either to offset future COBRA premium payments by the amount of the overpayments or issue refund checks.

A more complicated procedure involves beneficiaries whose eligibility for the subsidy ended in November and who didn’t pay the full unsubsidized December premium.

Under the legislation, those individuals–if they paid their 35% share of the premium in the month prior to losing the subsidy–will have a right to pay 35% of the premium later and receive retroactive coverage.

Beneficiaries could receive retroactive coverage if they pay the 35% share within 60 days of the bill’s enactment or, if later, 30 days later after their former employer sends them notice that describes the new 15-month premium subsidy.

Employers are required to send a special notice to all premium subsidy-eligible beneficiaries who are on COBRA beginning on or after Nov. 1, 2009, describing the 15-month premium subsidy.

The legislation ends a problem created by the original subsidy law. That law required individuals to satisfy two conditions to be eligible for the premium subsidy:

They must have been involuntarily terminated from Sept. 1, 2008, through Dec. 31, 2009, and they must have been eligible to receive the subsidy during that period.

That second condition was not widely understood and may have resulted in employees laid off in December not being eligible for the subsidy.

That could happen in situations where employers allowed laid-off employees to continue regular group coverage through the end of the month. As a result, those individuals would not be entitled to the subsidy because their COBRA eligibility didn’t begin until Jan. 1, 2010, one day after the cutoff date.

Future Extensions?

“This may not be the end of it,” said Rich Stover, a principal with Buck Consultants LLC in Seacaucus, N.J.

The likelihood of a future extension will depend on where the unemployment rate goes in the coming months, said Ms. Anderson of Towers Watson.

COBRA Enrollment Rates Double to 39% from 19%

One survey found that the subsidy resulted in a surge in COBRA enrollment rates. Hewitt Associates reported last August that the COBRA opt-in rate for terminated employees more than doubled after the subsidy program.

From March 1, 2009–when the subsidy generally first became available — through Nov. 30, 2009, monthly COBRA enrollment rates for laid-off employees averaged 39%, according to a Hewitt analysis of COBRA enrollment among 200 large employers.

By contrast, from Sept. 1, 2008, through Feb. 28, 2009, an average of 19% of involuntarily terminated employees were enrolled in COBRA.

Federal Register Notice

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This entry was posted by Adam V. Russo on Monday, January 18th, 2010 at 8:46 am and is filed under ERISA, Health Care Legislation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.