COBRA Compromises in the American Recovery and Reinvestment – Conference Report
Category: 2009 Stimulus
Topics: 2009, stimulus
The American Recovery and Reinvestment – Conference Report (2009 stimulus) has been released, which you can find it at the House Rules Committee and the House Appropriations Committee. We’ve also taken the relevant section (B) and posted it for you to download.
Compromises Reached
Premium Reduction / Subsidy
Premiums will be reduced by a 65% subsidy for 9 months after the enactment of the Act. It will most likely include March through December premiums, and Employers will take this as a credit toward payroll taxes.
High Income Exclusion
If the adjusted gross income of a participant exceeds $125,000 a year, or a family’s AGI exceeds $250,000, their income tax will be raised by the premium reduction amount – effectively removing the subsidy. Participants can request to not receive the subsidy to prevent the tax implications.
New Notification Period
For any Assistance Eligible Individual who became entitled to elect COBRA before the enactment of the Law, Administrators shall provide, within 60 days, an additional notification. Failure to do so is a failure to comply with COBRA.- Event dates are between 9/1/2008 and the passage of the Act.
- New coverage will commence on the first period of coverage after the act is enacted, most likely 3/1/2009.
HIPAA: The Gap in coverage between the event date and the start of new coverage shall be “disregarded for purposes of determining the 63-day periods.”
Plan Enrollment Capability
For a 90 day period following notification, existing QBs can change plans to any coverage offered by the employer/organization with the following requirements:- Plan cannot be Dental/Vision/Counseling/Referral and cannot be an FSA or HRA.
- New COBRA participants could enroll in the plan also, and Coverage is also offered to active employees.
- Premiums do not increase past the premium QB had at the time of the Qualifying Event.
Excluded from the Bill
Long Term Employees
There is no provision in the bill for employees 55 and older, or who have worked for 10 years or longer to remain on COBRA until 65. This was in the House version.
16 Responses to “COBRA Compromises in the American Recovery and Reinvestment – Conference Report”
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February 13th, 2009 at 12:29 PM
My company laid off many people in August of 2008, and some signed up for COBRA coverage on Sept 1, 2008. Are they gong to get the subsidy? It sound like it was intended for them to get help, but now they are cut-off?
February 13th, 2009 at 12:41 PM
@JohnK – The language that we talked about on This Comment is still in the final bill. It looks like, in my opinion, only qualifying events on/after 9/1/2008 are eligible.
Others may have different interpretations.
February 14th, 2009 at 12:31 PM
Will people who were laid off after 9/1/08 and immediately elected COBRA coverage be reimbursed for the premiums they have paid to date?
February 14th, 2009 at 01:12 PM
@Jason – no, but as of 3/1/2009 those people, if the event was involuntary termination, should get a 65% premium reduction for 9 months.
February 15th, 2009 at 06:45 AM
I have read what I could find regarding the COBRA changes in the actual bill and did not see the 90 day Open Enrollment feature for all active employees and all QE now on COBRA. Where was that?
Also, does this mean if someone were to start on COBRA 6/1/09, they would only get the subsidy through 12/31/09 – and not really for a full nine months but only from 6/1/09 through 12/31/09, or 7 months. If you started on COBRA 12/1/09, you would only get a one month subsidy??
I don’t know who did the math but if you start 3/1/09 and add nine months, that only takes you though 11/30/09.
February 15th, 2009 at 08:36 AM
@Rose – It’s in section 3001.a.1.b—you can search for “Plan Enrollment Option”
It’s an interesting point about whether it ends 11/30/2009; my take on it is that it talks about 9 months after the first day of the first month following enactment; we’ll see if there are clarifications on that.
February 17th, 2009 at 09:54 AM
So, will employees have to report the 65% as income on personal income taxes? The higher income employees will have this added to their tax bill? —Or do you mean their taxable income. That’s two different things…. Thank You
February 17th, 2009 at 10:12 AM
@Pat – the 65% will not be considered as income. However, high-income (>125,000 for single, 250,000 for dual filers) will have the subsidy added to their tax bill.
February 17th, 2009 at 01:47 PM
With this new stimulus bill, If I elect to have cobra now will I have to pay the back amounts to september 1, 2008 or from the point of election forward, 3-1-2009.
Sheri
February 17th, 2009 at 08:11 PM
Hello,
Thanks for providing all of this information about the Stimulus and Cobra! I began Cobra on 6-1-o8. This date is three months prior to the ‘qualifying events’ date of 9-1-08. Am I eligible for the subsidy? Thanks in advance for your answer!
Geo
February 17th, 2009 at 09:21 PM
@George: Based on the writing in the law, in my opinion no… You can give The White House feedback on your situation.
February 17th, 2009 at 09:27 PM
I assume the insurance company I have cobra with will contact me with new premium amount. Will I get reinbursed for the last 2 mounts of extreme rate?
February 17th, 2009 at 09:53 PM
I was laid off in March 2008, but my employer was paying my health insurance as part of my severance package. I started paying for my own insurance on COBRA as of Nov. 1, 2008. Would I qualify for the 65% reduction?
February 17th, 2009 at 10:22 PM
I lost my job as a teacher, my contract was on effect till end of august but my employer paid insurance through nov. The majority of people around the country were laid off prior to sept 08 so this is an empty and very safe gesture. It has the appearance of helping those struggling but for those of us out of work longer we still face the choices of food or medical care. To the Washington do gooders ” we are not that stupid.”
February 18th, 2009 at 12:08 PM
I work fulltime and have health insurance. One of two things is about to happens to me:
1. My hours will be cut to the point that I no longer qualify for insurance.
2. I will voluntarily cut my hours (and no longer be eligible for ins.) because I go to school fulltime also and just can’t do both.
Will I be eligible for COBRA assistance?
February 18th, 2009 at 01:26 PM
All—we can’t go in and say on each case if you’re eligible for the subsidy. Here are the guidelines
I know this upsets many people that are not eligible—please direct your comments to the White House at http://www.whitehouse.gov/the_press_office/arra_public_review/