STIMULUS ACT INCLUDES COBRA CHANGES 

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (i.e. the "Stimulus Act") into law.  This new law includes, among its many provisions, a significant expansion of the coverage obligations for employers under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). 
 
COBRA
 
COBRA was originally enacted to provide continued coverage of health benefits to a former employee after a "qualifying event" occurs.  A "qualifying event" includes termination of employment (other than the employee's gross misconduct).  If a terminated employee elects to continue coverage under COBRA, the entire premium is paid by the terminated employee. 
 
THE ACT
 
To provide relief for unemployed Americans, the Act provides that employees who are involuntarily terminated from employment are required to pay only 35% of their monthly premium payment.  The remainder of the premium is paid by the former employer.  The employer can then seek a credit against payroll taxes as reimbursement from the federal government.   The Treasury Department will develop reimbursement forms and procedures shortly.
 
            Eligibility
 
Employees who are involuntarily terminated between September 1, 2008 and December 31, 2009 are eligible for the subsidy.  However, to be eligible, annual income cannot exceed $125,000 for a single person and $250,000 for couples.  Even if the former employee declined COBRA continuation coverage after September 1, 2008, the former employee has the option to elect COBRA continuation coverage in a special sixty (60) day election period.  Beginning February 17, 2009, individuals have 60 days from the date of receipt of the notice (provided by the employer - see below) of the option to enroll.  If elected, coverage and the associated subsidy will commence with the first period of coverage beginning on or after February 17, 2009.    
           

           Premium Assistance
 
Enrollees who qualify may receive subsidies for up to nine (9) months.  However, these subsidies apply only to COBRA premiums for any period of coverage beginning on or after February 17, 2009, the effective date of the Act.  For most employers, the period of coverage beginning on or after February 17, 2009 is March 1, 2009.  Subsidies will terminate if the enrollee obtains coverage through another employer or is eligible for Medicare.
 
            New Notice Requirements
 
Under the Act, employers are required to modify their existing COBRA notice to include additional information regarding the subsidy.  They must also provide notice to those qualified beneficiaries who are eligible under the special 60-day election period.  Employers are also required to provide notice of the availability of lower cost health plan options and any eligibility under another plan.  Finally, the notice must include information regarding the penalty for failure to provide the notice.  The penalty for failure to provide this notice is treated under the Act as if the employer failed to meet the notice requirements under COBRA. 
 
The federal government will publish model notices on or before March 19, 2009.  In the meantime, please contact Andrews & Wyatt for assistance with the notice requirements or with any other questions.