Latest COBRA Subsidy Extension Requires Immediate Employer Action

Benefits Brief
March 25, 2010

The Temporary Extension Act of 2010 enacted earlier this month has extended the limited government subsidy of COBRA continuation coverage yet again. As our readers will recall, the subsidy was originally enacted as part of the American Recovery and Reinvestment Act (ARRA) and first extended last December. The subsidy is generally equal to 65% of the cost of COBRA continuation coverage for 15 months and is now available for employees and their eligible dependents who lost or will lose coverage due to an involuntary termination of employment from September 1, 2008 through March 31, 2010 (rather than through February 28, 2010). The latest extension also expands eligibility for the subsidy to (and requires a new special election notice for) certain individuals who (1) experienced a COBRA qualifying event due to loss of coverage under an employer’s group health plan due to a reduction in hours on or after September 1, 2008 and (2) were subsequently involuntarily terminated on or after March 2, 2010 and before April 1, 2010. (The new law also clarifies the calculation of the 15-month subsidy period.)

The Department of Labor (DOL) recently issued several model notices that employers can use to satisfy the various new reporting obligations, as well as updated General and Alternative Notices, which are described in an earlier advisory. The model notices are available on the DOL Website.

Medicaid/SCHIP Model Notice Now Available  

As required under the Children’s Health Insurance Program Reauthorization Act of 2009, which is described in our earlier advisory, the DOL has published a model notice that employers may use to notify employees about the availability of employer group health plan premium-assistance programs under Medicaid and/or a State Children’s Health Insurance Program (SCHIP). Employers maintaining a group health plan (whether fully insured or self-insured) for residents of a state that provides premium assistance under a state Medicaid plan or child health assistance under a state child health plan must provide the notice annually beginning on the later of (1) the first day of the first plan year after February 4, 2010 or (2) May 1, 2010 (so for a calendar year plan, the notice must be provided by January 1, 2011). As of January, 2010, 40 states provided such assistance, including Massachusetts. The notice must be provided to all employees residing in those states, regardless of enrollment status. For convenience, however, an employer may simply provide the notice to all employees.  A copy of the model notice is available on the DOL’s Web site.