COBRA premium subsidy temporarily extended again

By Lori Basilico, Partner, Edwards Angell Palmer & Dodge LLP

On March 2, 2010, President Obama signed the Temporary Extension Act of 2010 (the “TEA”) extending the COBRA premium subsidy eligibility period for an additional month, through March 31, 2010.

This extension permits individuals who are involuntarily terminated between September 1, 2008 through March 31, 2010 to elect COBRA continuation coverage and pay only 35% of the COBRA premium for up to 15 months.

The TEA also makes the following changes: 

  • Reduction in hours followed by an involuntary termination. Individuals who lose group health plan coverage as a result of a reduction in hours on or after September 1, 2008, followed by an involuntary termination of employment between March 2, 2010 and March 31, 2010, will be eligible for the COBRA premium subsidy. The COBRA premium subsidy will only apply to periods of coverage following the involuntary termination and the maximum COBRA period will be measured from the date of the earlier reduction in hours. Employers must notify these individuals, within 60 days of their involuntary termination of employment, of the availability of the COBRA premium subsidy and their election rights. 
  • Employer Determinations. The TEA clarifies that an employer’s determination that the qualifying event for an individual was the employee’s involuntary termination of employment will not be subject to challenge by governmental authorities if the determination is based on a reasonable interpretation of the law and administrative guidance and the employer maintains supporting documentation. 
  • Additional Penalties. If the Secretary of Labor or the Secretary of Health and Human Services determines that an individual is eligible for the COBRA premium subsidy, the TEA permits the “affected individual” or the Secretary to bring a civil action to enforce the determination. In addition, the Secretary may assess a penalty against the plan sponsor or health insurance issuer of up to $110 per day for each failure to comply the Secretary’s determination.

Although this short-term measure extends the COBRA premium subsidy eligibility period through March 31, 2010, Congress is considering a longer extension of the eligibility period, possibly to include involuntary terminations through December 31, 2010.

 

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