DOL Issues Model Notices for COBRA Subsidy Extension and Update on Health Care Reform

DOL Issues Model Notices for COBRA Subsidy Extension

On January 13, 2010, the Department of Labor (the “DOL”) released model notices updated for the COBRA subsidy extension provisions contained in the Department of Defense Appropriations Act, 2010 (the “DOD Act”). The DOD Act extended the COBRA subsidy provisions enacted under the American Recovery and Reinvestment Act of 2009 (“ARRA”).

As a reminder, under ARRA, individuals who were involuntarily terminated between September 1, 2008 and December 31, 2009 were eligible to receive a 65 percent subsidy toward the cost of their COBRA health care premiums for up to 9 months, and employers received a credit against their payroll taxes to recoup the cost of the COBRA subsidy provided to these Assistance Eligible Individuals (“AEIs”).

Under the DOD Act, individuals who are involuntarily terminated through February 28, 2010 are now eligible to receive the COBRA subsidy, and the COBRA subsidy is available for an additional 6 months. This means that an individual may be entitled to receive subsidized COBRA coverage for a total of 15 months. The DOD Act’s COBRA subsidy provisions also include additional notice requirements for group health plan administrators and insurance issuers.

DOL Model Notices

The DOL issued the following model notices to assist plan administrators and insurance issuers with complying with the updated notice requirements:

Updated General Notice: Plans subject to COBRA must provide the Updated General Notice to all qualified beneficiaries who experienced any type of qualifying event from September 1, 2008 through February 28, 2010, and who have not yet been provided an election notice. This model notice includes updated information on the COBRA subsidy, as well as the information required in a COBRA election notice. For qualifying events that occur after December 19, 2009, the Updated General Notice must be provided within the normal timeframe for providing a COBRA election notice. However, the DOL notes on its webpage, that for individuals who experienced a termination of employment during December 2009, but were not eligible for COBRA coverage until January 2010, the 60-day COBRA election period will not start until the Updated General Notice has been provided.
Premium Assistance Extension Notice: Plan administrators must provide notice to certain individuals who have already been provided a COBRA election notice if the notice did not include information about the COBRA subsidy extension. The individuals who should receive the Premium Assistance Extension Notice, which includes information about the extension, and the associated timing requirements, are as follows:
- Individuals who were AEIs as of October 31, 2009 (unless they are in a “transition period,” as explained below), and individuals who lost health coverage due to a termination of employment on or after October 31, 2009 (unless they were already provided a timely, Updated General Notice) must be provided the Premium Assistance Extension Notice by February 17, 2010.
- Individuals who are in a “transition period” must be provided the Premium Assistance Extension Notice within 60 days of the first day of the transition period. An individual’s “transition period” is the period that begins immediately after the end of the maximum number of months (generally 9) of the COBRA subsidy available under ARRA, prior to the extension to 15 months under the DOD Act. An individual is in a transition period only if the COBRA subsidy provisions would continue to apply due to the extension from 9 to 15 months, and the individual otherwise remains eligible for the COBRA subsidy.
Updated Alternative Notice: Insurance issuers that provide group health insurance coverage must send the Updated Alternative Notice to individuals who became eligible for continuation coverage under state law. As continuation coverage requirements vary among sates, insurance issuers should modify the DOL’s model Updated Alternative Notice as necessary to conform it to applicable state law. Insurance issuers may also use the Premium Assistance Extension Notice and the Updated General Notice, as applicable.

For more information on the COBRA subsidy extension, or for copies of the DOL’s model notices, contact your SGR Executive Compensation and Employee Benefits counsel. Stay tuned for additional SGR Client Alerts and webinars on the COBRA subsidy extension.

Update on Health Care Reform

On November 7, 2009, the U.S. House of Representatives passed the “Affordable Health Care for America Act” (H.R. 3962), and on December 24, 2009, the U.S. Senate passed the “Patient Protection and Affordable Care Act” (H.R. 3590). There are many differences between the House and Senate bills. As such, Congress is working to integrate the two bills into a unified health care reform bill. As soon as Congress passes a unified health care reform bill, we will provide an analysis of its contents and how employers should prepare.

Stay tuned for additional SGR Client Alerts and webinars on health care reform. For more information on the current status of health care reform, contact your SGR Executive Compensation and Employee Benefits counsel.