Premium Assistance for COBRA Continuation Coverage
Section 3001 of the American Recovery and Reinvestment Act of 2009
ARRA

Summary

Section 3001 of ARRA provides for premium assistance in the amount of 65% of the premium plus administrative fee for certain individuals who are "involuntarily terminated" and their families if they elect COBRA continuation health coverage. Under this provision, an eligible individual is generally one who a) is a qualified beneficiary resulting from an involuntary termination between September 1, 2008 and December 31, 2009; b) is eligible for COBRA continuation coverage at any point during that period; and c) elects the coverage. This section was extended on December 19, 2009 under the Department of Defense appropriations.  The ARRA subsidy has been extended and now applies to qualified beneficiaries involuntarily terminated through 5/31/2010.

Essentially, group health plans must consider eligible individuals as having paid the full amount of the premium if the individual pays 35% of the premium. The employer is then reimbursed for the other 65% via a credit against its payroll tax. With the Department of Defense appropriation bill the 65% is applicable for a period of 15 months instead of the original 9 months.

Keeping in mind the growing number of layoffs, the intent of this legislation was to enable individuals who were involuntarily terminated to maintain health insurance coverage while they are out of work. Unfortunately, the legislation requires an up-front funding of the subsidy by employers, who also may be struggling as a result of the economy.

For additional details, please view the links below:

The U.S. Department of Labor's Summary of COBRA Premium Reduction may be found at:

http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html

Additional information may be found at:

Department of Health and Human Services:

http://www.cms.hhs.gov/COBRAContinuationofCov/

Internal Revenue Service:

http://www.irs.gov/newsroom/article/0,,id=204505,00.html