EMPLOYMENT NOTES FOR BUSINESS AND GOVERNMENT CLIENTS  -  ALERT

COBRA Subsidy Model Notices Released

Yesterday, the Department of Labor issued a news release containing FAQ’s and links to additional information, including four model notices, regarding the new COBRA Subsidy included in the American Recovery and Reinvestment Act (ARRA) (the Stimulus Act). 

The ARRA provides a 65% tax subsidy for a period of up to 9 months for COBRA continued health benefits for involuntarily terminated employees and their families covered by their former employer’s health plan. 

This subsidy applies to covered employees and qualified beneficiaries of employees who are involuntarily terminated between September 1, 2008 and December 31, 2009 (assistance eligible individuals).  Covered employees and qualified beneficiaries who qualify for coverage under another group health plan (of a new employer or a spouse’s employer) are not eligible for the subsidy. 

Covered employees and the qualified beneficiaries of employees terminated between September 1, 2008 and February 16, 2009, even those who elected not to continue their health insurance, must be provided an additional notice and a second election opportunity for COBRA coverage.  This notice must be provided no later than April 18, 2009.

The subsidy also covers employees and their families who are eligible for continuation coverage under state law but the new special second election period for individuals terminated between September 1, 2008 and February 16, 2009 does not apply. 

Covered employees and qualified beneficiaries of employees terminated after February 16, 2009, should be provided with the appropriate notices immediately or as soon as possible. 

The Department of Labor materials call for the new notices to be provided to all covered employees and qualified beneficiaries who are entitled to COBRA (or state law) continuation as a result of loss of coverage after February 16, 2009 (not just assistance eligible individuals).  It appears that it is sufficient to provide the notices only to assistance eligible individuals for those who lost coverage before February 17, 2009. 

Per the Department of Labor website, the four new model notices issued by the Department of Labor are to be used as follows:

General Notice (Full version) Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. This full version includes information on the premium reduction as well as information required in a COBRA election notice.

General Notice (Abbreviated version) The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.

Alternative Notice Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

Notice in Connection with Extended Election Periods Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

 1.  Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
 2.  Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

This notice includes information on ARRA’s additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

Employment Notes is a general discussion of legal issues and is not intended to be legal advice.  Readers should seek the advice of competent legal counsel to review the specific facts and law regarding any given legal matter.