The long anticipated extension of subsidized COBRA benefits for involuntarily terminated employees and their families has now been passed by the US Congress.  An amendment to the Fiscal Year 2010 Defense Appropriations Act was signed by President Barack Hussein Obama yesterday, and is effective immediately.
Under the original American Recovery and Reinvestment Act (ARRA) which took effect early this year, the federal government (i.e.: the American taxpayer) has been paying 65% of the cost of COBRA coverage for medical and dental benefits continued by employees who were laid-off or otherwise terminated involuntarily since 9/1/08, and did not have the option of other coverage.  The termination had to occur on or before 12/31/09, AND COBRA coverage had to begin prior to 1/1/10.  Practically, this meant it only applied to involuntary terminations on or before 11/30/09, since most employees terminating during the month of December would not be eligible for COBRA continuation until January 1st, which would be one day too late.
The subsidy extension provisions of this new act make 3 major changes.  First, it extends until February 28, 2010 the date by which involuntary termination must occur to be eligible for the subsidy.  Second, it extends the subsidy period from the original 9 month maximum to as long as 15 months.  And Third, it removes specification of the final date COBRA coverage must begin in order to be eligible.  Only the date of the qualifying event (involuntary termination on or before 2/28/10) is used in the eligibility determination, without regard to the date COBRA is actually effective for any person.
The new law does not change the basic definition of an Assistance Eligible Individual (AEI), nor does it extend the maximum length of time a person is eligible to continue benefits under COBRA, nor does it change the amount of the subsidy.  But it does require new and modified COBRA notices once again.  (This is federal law only, for firms of 20+ employees.  It remains to be seen how many states adopt this for smaller employers.  Minnesota’s legislature doesn’t meet again until February 4.)
AEIs who exhausted their original nine months COBRA subsidy period before the new law took effect can receive the subsidy for up to an additional 6 months, as long as they remain AEIs and their maximum COBRA eligibility period does not expire.    AEIs who dropped their COBRA coverage when their original subsidy ended (i.e. December 1st) must be notified of this new law and be giving the opportunity to apply for reinstatement and the subsidy extension.  AEI’s who continued coverage at the higher (normal) COBRA cost must also be notified of this new law, and be given the opportunity to receive credit for, or refund of, any overpayment.
Model notices are expected from the US Department of Labor, and must be provided within 60 days of the AEIs dropping of coverage or overpayment.  AEI’s have 60 days from the 12/21/09 enactment date to pay for coverage (which calculates to a 2/19/10 deadline) or, if later, 30 days after notice is provided.
Another new notice requirement involves any person terminated for any reason on or after 10/31/09.  Such persons must be notified of these new provisions within 60 days of enactment of this new law, or if later, the normal deadline for notice of a COBRA qualifying event.
All insurance carriers are busy working on their own rules, forms and procedures, and will send information to employers as quickly as the effects of the new law can be fully understood and communicated.  Watch for mailings directly from them.  Also, check the Department of Labor website (www.dol.gov/ebsa/cobra) for updated information and model notices.  As of early Tuesday Dec. 22, that website had not been updated, but one would hope that it will be soon, in spite of the holiday season.