Although ARRA’s COBRA subsidy period is set to expire Dec. 31 and lawmakers are pushing for an extension, a decision has not yet been made.

If passed, it’s still unclear what form an extension of the COBRA subsidy program will take. Bills were introduced recently in the House and the Senate that not only extend COBRA benefits through June, but also increase the current subsidy of 65 percent to 75 percent. It’s unclear if the subsidy increase will apply to all current ARRA-eligible COBRA participants, newly-employed or both. It’s also unclear if those who have received 65 percent will be entitled to any adjustment for their time already on COBRA.

While uncertainty remains, it’s important to prepare for year-end and get ready for the possibility of a COBRA subsidy extension in the year ahead by taking these critical steps:

• Report fourth quarter ARRA credits. Currently, eligible employees pay 35 percent of their COBRA premium and the remaining 65 percent is reimbursed to the employer through a tax credit. Employers should use the updated Form 941, Employers Quarterly Federal Tax Return, to claim their COBRA premium assistance payments. Accurate reporting is critical – make sure to double-check your list of active participants and maintain good documentation.


• Notify your participants of premium changes. Once the period ends, participants will be responsible for the ENTIRE portion of the COBRA premium. That means those who had a qualifying event on March 1, should pay 100 percent of the premium on Dec. 1. So, make sure to keep your participants up-to-date, let them know what invoice adjustments to expect so there are no surprises. This will be an ongoing process over the next year as your participants cycle through the current nine-month subsidy expiration.


• Utilize proper notices. Employees who were laid off before Dec. 31, and who are otherwise COBRA-eligible, may continue getting the subsidy. But those laid off after Dec. 31 (or those who are not COBRA-eligible until after Dec. 31) will not, unless an extension is passed. In response, you’ll need to amend COBRA notices and forms yet again, going back to the forms used before the subsidy started.

Create a communication strategy. If the program is extended, plan to alert all COBRA participants immediately. Communications should include all changes, how they affect participants and how payments will change. Once participants are notified of the extension, you should continue to inform participants of impending deadlines and expirations.

Did You Know?

Without the subsidy, COBRA premiums for family health coverage costs laid-off workers, on average, $1,111 a month. That amount is almost 84 percent of the average monthly unemployment check, according to Families USA, a nonprofit consumer advocacy organization. Ron Pollack, the group’s executive director, predicts most people who lose the subsidy will become uninsured because of the high cost of health care coverage.

Connections

When should you notify COBRA participants of upcoming subsidy and COBRA invoice changes?
More information on ARRA and COBRA subsidy assistance can be found at:

• The US Department of Labor
• Internal Revenue Service
• Text from COBRA Subsidy Extension and Enhancement Act of 2009
• Text from Extended COBRA Continuation Protection Act of 2009

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