Summary - COBRA Legislative Changes Included in House and Senate Economic Stimulus Legislation
2/6/2009
The following is a short synopsis of the changes to COBRA legislation currently included in the different versions of the House and Senate economic stimulus legislation. Both the House and Senate bills include a COBRA premium subsidy for involuntary losses of employment between September 1, 2008 through December 31, 2009.
Senate Finance Committee
65% federal premium subsidy
Subsidy Length
9 months
Expanded COBRA eligibility
No provision
Effective Date
April 1, 2009
New Model Notices
Within 30 days of enactment
House Ways and Means Committee
65% federal premium subsidy
Subsidy Length
12 months
Expanded COBRA eligibility
COBRA beneficiaries 55 and older and works with 10 years at a company could keep COBRA until eligible for Medicare
Effective Date
March 1, 2009
New Model Notices
Within 30 days of enactment
General Information:
Expanded COBRA eligibility not likely to remain in stimulus package. Lobbyists successful to keep it out of Senate bill. Subsidy most likely will pass.
Qualified beneficiary pays 35%, Employer pays 65%. Employer claims subsidy as a credit against payroll taxes.
Require 60 day election period for those eligible for the subsidy but failed to previously elect COBRA.
Senate bill allows current COBRA participants to switch to any other medical option under the employer's plan.
Beneficiaries eligible for coverage under new employer's plan or Medicare must inform employer and end the subsidy. Failure to do so would result in a penalty imposed on the beneficiary of 110% of the subsidy provided after eligibility ended.
Challenges for employers who do not outsource COBRA administration:
Must create special enrollment notices and send to all employees who terminated employment since 9/1/2008.
Must prepare special notice to existing COBRA participants informing them of the new subsidy and possibly allowing them the opportunity to change medical options.
New administrative procedures (new premium structure, notices calculating subsidy for credit against employer taxes).
Must update existing COBRA initial notice and election notice to include new subsidy rules.
Must create notice to inform COBRA participants when they reach the subsidy limit.
Must update payroll systems to accommodate subsidy.
Must notify those eligible that terminated 9/1/2008 or later (through 12/31/2009) of the subsidy and offer them COBRA coverage again with the subsidy, even if they did not elect COBRA initially. Determining who, how to find them difficult.
Must notify current COBRA continuants of subsidy provision and provide new coupons for coverage going forward.
Categories: COBRA