At the end of this year, ARRA’s COBRA continuation subsidy period is slated to expire. Maybe you’ve already begun to contemplate how the change will affect your participants and your organization. Prepare for the final stages by following these important steps:

• Inform your participants of pending premium changes. Once the subsidy 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 will start paying 100 percent of the premium due on December 1. Currently, eligible employees pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the employer through a tax credit. Give your participants plenty of advance notice so they’re not caught off guard by a larger COBRA invoice.
• Notify your carriers of changes in plan participation. Participants come and go – remember to remove them from the plan as they drop off. You don’t want to pay for coverage if the participant isn’t paying you! Many health insurance companies will only go back 60 days to remove an inactive participant. If you’re paying for someone who is no longer participating, you’re wasting money and adversely impacting your bottom line. Manage your carrier invoices by reconciling your participant roster regularly and communicating changes to your carriers.

• Report participant changes to payroll and the IRS. Let your payroll department or provider know as soon as a participant stops coverage, and as soon as the premium subsidy no longer applies. Accurate reporting is critical. Employers should use the updated Form 941, Employers Quarterly Federal Tax Return, to report their COBRA premium assistance payments. You’re required to let the government know when an employee stops taking the subsidy through quarterly reporting.

What if ARRA’s COBRA Continuation Assistance is extended?

Congressional leaders are considering an extension to the federal program that provides COBRA subsidy assistance. If the program is extended, plan to alert all COBRA participants immediately! Create a careful communication strategy, offering the extension date(s), any changes to the subsidy credit amount, and provide information on how the changes will directly impact participants.

Did You Know?

The economy lost another 263,000 jobs in September, according to the U.S. Department of Labor. This figure is considerably higher than economists expected. House Majority Leader Rep. Steny Hoyer, D-Md., said leadership is contemplating the continuance of the COBRA health benefit subsidy. And on October 6, Nasdaq reported that Obama administration officials said they were considering further stimulative measures in the face of the continuing weak job market – including an extension of COBRA subsidies.

COBRA Notification Schedule

When should you notify COBRA participants of upcoming subsidy and COBRA invoice changes?

By keeping participants prepared for upcoming changes, you’ll eliminate surprises and improve your collection success. We recommend the following notification schedule:

• 60 days before the participant’s subsidy expires: Include a notice with the COBRA invoice alerting the participant of the subsidy expiration.
• 30 days before the participant’s subsidy expires: Send the same letter again.
• Upon expiration: Send a note of explanation when the COBRA invoice changes.

This will be an ongoing process over the next year as your participants cycle through the 9-month subsidy expiration.

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