Cobra Update

Did you realize that the Stimulus Package has made changes to the Cobra options offered to involuntary terminated employees back as far as September 1, 2008?

On Tuesday, February 17, 2009, President Obama signed the American Recovery and Reinvestment Act into law. Included in the Act is a provision that may affect any companies which are required to offer COBRA to former employees: the Health Insurance Assistance for the Unemployed provision.

At this point, numerous items in the Act are unclear. So far, one major component of the Act is clear:

• A 65 percent subsidy toward the purchase of health insurance will be available to individuals:
• who have been involuntarily terminated from their employment between September 1, 2008 and December 31, 2009, and
• who earn less than $125,000 (single) or $250,000 (couples) annually.
• The subsidy will only be good for a nine-month period and will be for the purchase of health insurance only.
• The Treasury Department will administer the subsidy, providing employers with a credit against their payroll taxes to cover the cost of the subsidy.
• While there is no “look-back provision” for current COBRA Participants, qualified individuals who were involuntarily terminated and initially declined COBRA coverage will be allowed to reverse their earlier decision. Specifically, a special election period will be offered during which they may elect COBRA coverage and thereby receive the subsidy.

This provision may well increase the number of individuals on COBRA.

Now that this is law, the DOL is expected to release guidance concerning this provision.

For more information about Cobra Adminstrators that can help you comply with these new changes, please contact Ray Ward at Legacy Benefits & Insurance Service.