The Consolidated Omnibus Budget Reconciliation Act ("COBRA") applies to employers who have 20 or more employees on more than 50% of business days during the prior calendar year. COBRA requires group health plans sponsored by covered employers to allow a qualified beneficiary who would otherwise lose group health coverage upon the occurrence of certain qualifying events to continue such coverage at the beneficiary’s own expense.
The American Recovery and Reinvestment Act of 2009 ("ARRA") significantly changes COBRA. Among other things, ARRA: • Allows an "assistance eligible individual" to pay only 35% of the COBRA premium and be treated as having paid the full amount;
• Requires the coverage provider (typically the employer) to pay the remaining 65% of the COBRA premium and seek reimbursement from IRS through an employment tax credit;
• Defines an "assistance eligible individual" as a qualified beneficiary receiving COBRA because of the covered employee’s involuntary termination of employment between September 1, 2008 and December 31, 2009;
• Applies to periods of health coverage beginning on or after February 17, 2009 and lasts up to 9 months;
• Requires employers to provide notice about the premium reduction by April 18, 2009 to individuals who had a COBRA qualifying event during the period from September 1, 2008 to February 16, 2009; and
• Requires employers to provide notice and a new COBRA election opportunity by April 18, 2009 to employees who were involuntarily terminated from employment during the period from September 1, 2008 to February 16, 2009 and who did not elect COBRA when it was first offered or who did elect COBRA but are no longer enrolled.
Because ARRA materially changes an employer’s responsibilities under COBRA, all employers should review their COBRA policies, practices, and notices for compliance.
For assistance in complying with COBRA and other legal matters, please contact our Employment Law Group at (301) 340-2020.
