COBRA premium subsidy extended for third time
Congress has extended eligibility for the COBRA premium subsidy for two months as one provision of The Continuing Extension Act of 2010 enacted April 15th.
The subsidy, which expired March 31, is now available to qualified individuals who lost their jobs between September 1, 2008, and May 31, 2010. The premium reduction, originally a provision of The American Recovery and Reinvestment Act (ARRA), applies to periods of health coverage that began on or after February 17, 2009, and lasts for up to 15 months.
The subsidy already has been extended twice. Democrats in Congress are working on a bill that will extend the COBRA subsidy for a longer period, at least until the end of the year, but passage may prove difficult because of cost concerns.
Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. Employers claim a credit for the subsidy on their payroll tax returns: Form 941, Employers Quarterly Federal Tax Return; Form 944, Employer’s Annual Federal Tax Return; or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees.
To be eligible for the subsidy, the terminated worker must have experienced a qualifying event, which can include a reduction in hours followed by termination; must elect the coverage within the required timeframe; and must not be eligible for Medicare or any other group coverage.
The premium subsidy is retroactive and will be made available to individuals who lost their job between March 31st and April 15th.
Under COBRA law (the Consolidated Omnibus Budget Reconciliation Act of 1985), employees of companies that offer health insurance and who were not fired for cause are eligible to continue coverage for themselves and any previously covered dependents. Employers are permitted to charge 102 percent of the COBRA premium cost to their former employees.
Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Employers must provide terminated individuals with updated ARRA COBRA notices.
A study conducted by Department of the Treasury's Office of Economic Policy estimates that up to one-third of eligible unemployed workers have taken advantage of the COBRA subsidy, USA Today reported.
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