President Barack Obama signed the American Recovery and Reinvestment Act (ARRA), commonly known as the Stimulus Plan, into law on February 17, 2009. Portions of ARRA provide for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA.

On December 19, 2009, ARRA was amended by the Department of Defense Appropriations Act, 2010 (?2010 DOD Act?). This extended the COBRA subsidy eligibility period by two months, so that it would end on February 28, 2010, rather than December 31, 2009. It also extended the period of the COBRA subsidy from nine months to 15 months. On March 2, 2010, the Temporary Extension Act of 2010 was signed into law, further extending the COBRA subsidy eligibility period to March 31, 2010. The Continuing Extension Act of 2010 was signed into law on April 15, 2010, further extending the COBRA subsidy eligibility period to May 31, 2010.

The United States Department of Labor has posted a fact sheet regarding this on their web site, www.dol.gov/ebsa/newsroom/fscobrapremiumreduction.html.

The United States Department of Labor (USDOL) is the federal agency responsible for COBRA and the benefits related to the election of COBRA under ARRA. Their Web site is www.dol.gov. For updated information, please refer to this site and click on the American Recovery and Reinvestment Act Information. . 

The Centers for Medicare and Medicaid (CMS) is the federal agency responsible for the state continuation benefits under ARRA. For updated information on state continuation, please go to the following Web site: www.cms.hhs.gov/COBRAContinuationofCov and then click on Regulations and Guidance and then on More and then on COBRA Continuation of Coverage under Health Insurance Reform.

For entities that have 20 or more employees: Under ARRA, those employees that were involuntarily separated from their job (not for gross misconduct) from September 1, 2008 through May 31, 2010, are entitled to have the federal government subsidize 65% of their COBRA payments. Also eligible for this assistance is the employee’s spouse and dependents who elect COBRA due to the employee’s involuntary separation. This subsidy is taken by the employer directly from the payroll taxes when the separated employee pays 35% of the COBRA premium. Payroll taxes include federal income tax withholding and employee and employer FICA taxes. This subsidy is good for up to fifteen (15) months. Once a separated employee qualifies, then all other COBRA rules apply. The subsidy is not available to individuals whose income, in the year that they receive the subsidy, exceeds $125,000 or couples filing joint tax returns that exceed an income of $250,000.

For entities subject to State Continuation (less than 20 employees): For Nevada state continuation laws, see Nevada Revised Statutes (NRS) 689B.245 through NRS 689B.249, inclusive, or NRS 689C.340 through NRS 689C.348, inclusive (both sets of statutes are the same and apply to entities with less than 20 employees). Under ARRA, those employees that were involuntarily separated from their job (not for gross misconduct) from September 1, 2008 through May 31, 2010, are also entitled to have the federal government subsidize 65% of their state continuation payment. When the separated employee remits 35% of the state continuation premium to the carrier, the carrier will provide the 65% premium subsidy to the separated employee and then receive a tax credit from the federal government. This subsidy is good for up to fifteen (15) months.

Who does the ARRA apply to? The new law applies to all group health plans that are subject to COBRA and State Continuation, including state and local governments subject to COBRA.

When may eligible individuals receive the subsidy? The subsidy can be applied to premiums for the first period of coverage beginning March 1, 2009. The subsidy is on a going- forward basis and not retroactive.

Who receives the reimbursement? For COBRA, the government reimburses the employer through a reduction in payroll taxes. For state continuation, the insurer is entitled to the reimbursement, through a tax credit, after filing. For Multiple Employer Welfare Arrangements (MEWAs), the plan is entitled to the reimbursement. The new law allows a “grace period” during the first two months of coverage, which provides a two month period for the employer to credit or refund overpaid premiums.

Employer Refusal to Provide Group Continuation Coverage: The new law requires the USDOL to provide an expedited review of any employer’s refusal to allow a worker to elect group continuation coverage and receive the subsidy. Once the denied individual submits an application for review, the USDOL shall make an eligibility determination within 15 business days. If you have questions, contact the USDOL at (866) 444-3272 or visit the agency Web site: www.dol.gov/ebsa/COBRA.html. The telephone number for the USDOL at the San Francisco Regional Office is: (415) 625-2481.

State continuation appeals must go to the following address:
CMS
c/o COBRA Appeals
Mail Stop: C2-12-16
7500 Security Blvd.
Baltimore, MD 21244
For additional information, the CMS e-mail address is: NewCobraRights@cms.hhs.gov

Plans Covered: All group health plans subject to COBRA or State Continuation, consistent with federal or state law respectively, are eligible for the subsidy, including medical, hospitalization, vision and dental plans. Flexible spending accounts are not eligible.

Does the new law extend the length of available group continuation coverage? The new law does not change the length of time that group continuation coverage must be provided to eligible individuals. The subsidy is available for up to fifteen (15) months, but not longer than the maximum period under COBRA.

How can an eligible individual, under ARRA, lose eligibility for the group continuation subsidy? The eligible individual, under this law, can lose eligibility for the group continuation subsidy in two ways:

1. The subsidy lasts no longer than fifteen (15) months.
2. When the person receiving the subsidy becomes eligible for new group health coverage or Medicare.

Rules: The rules governing eligibility for subsidized COBRA differ from the rules governing eligibility for unsubsidized COBRA. Eligibility for unsubsidized COBRA ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the COBRA subsidy.

Notification: Beneficiaries must notify their former employer when they become eligible for new group health coverage. Those beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110% of the subsidy to the federal government. However, the penalty is not imposed if the beneficiary demonstrates “reasonable cause” for failure to notify.

Is the subsidy considered income for other Income-Based Government Programs? The subsidy will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program.

IRS: The IRS is holding weekly conference calls to address payroll issues for employers.

Additional Information: Please call the Division of Insurance, Consumer Services Section at (775) 687-0700 in Carson City, (702) 486-4009 in Las Vegas, or toll free in Nevada at 1-800-992-0900 for additional information.