Premium Reduction Calculation for 2009 Stimulus COBRA
Posted on February 20th, 2009 by Travis.Development | 29 comments »
Category: 2009 Stimulus
Topics: premiums, stimulus, traviscobra, webcobra
Category: 2009 Stimulus
Topics: premiums, stimulus, traviscobra, webcobra
Based on details provided by our administrators and government representatives during a conference call, here are several scenarios on how both TravisCobra and WebCOBRA will calculate premium reductions for the Stimulus Plan.
The general way to think about this is the 65% subsidy states that the premium should be considered paid for if the QB pays 35% of the premium. We’ll define the “premium” as the total due, so that includes the admin fee and normal employer subsidies.
2% Entered in the base rates with no set Admin Fee
$1000 Premium with $20 admin fee, entered into system as $1020- System Premium $1020
- System Admin Fee $0
- Government Subsidy: $663
- QB to Pay: $357
2% included in rates in the system
$1000 Premium with $20 admin fee, entered into system as $1000- System Premium $1000
- System Admin Fee $20
- Government Subsidy: $663
- QB to Pay: $357
Subsidy, rates included in the system:
$1000 Premium with $20 admin fee, entered into system as $1000, with $200 employer subsidy- System Premium $1000
- System Admin Fee $20
- Employer Subsidy: $200
- Total QB expected to pay (“premium”): $820
- Government Subsidy: $533
- QB to Pay: $287
29 Responses to “Premium Reduction Calculation for 2009 Stimulus COBRA”
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February 20th, 2009 at 02:20 PM
As third party administrators, how are we supposed to get the 65% subsidy to pass on to the carriers? and my interpretation of the 2% fee is that 65% of the 2% comes from the subsidy and the remainder from the QB… again, how do we collect it?
February 20th, 2009 at 02:33 PM
@Clark: If you pay the carriers directly, you could setup a drafting arrangement with your client/employers to draft their account for the 65% subsidy. You would then provide them a report on the subsidies used for them to use in their payroll taxes. That’s just one setup though.
February 21st, 2009 at 06:32 AM
We have a Self-Funded Plan how do we handle the 65% subsidy? Currently anyone that elects COBRA coverage sends the enrollment with payment to our TPA, who is our COBRA Admin. The payments are made payable to us and forwarded to us from the TPA once the payment has been posted on their end. Are we supposed to send to the TPA a check for the 65% subsidy, but made payable to us and once the TPA has completed the process return the check to us for depositing in our accounts? The rates to be used for the subsidy should be the rates for 2009 correct?
February 21st, 2009 at 02:19 PM
@Heather: If your administrator uses either TravisCobra or WebCOBRA, they’ll be able to provide you a report that lists all 65% subsidies for the period and then you can use that in your 941 taxes. You’ll want to work out with them the actual cash flows.
February 23rd, 2009 at 01:41 PM
Hello, I would like to know if dental and vision will fall under the stimulus. It mentions health and that can be pretty vague. Also, does anyone know if they have applied a deadline for these letters?
February 23rd, 2009 at 01:45 PM
@Nancy – TravisCobra and WebCOBRA will allow Health, Dental, and Vision plans to receive the subsidy based on IRS guidance on a conference call.
February 24th, 2009 at 09:43 AM
It was my understanding that the subsidy only applies to medical. Dental and vision plans are not included as part of the subsidy. Am I incorrect in this thinking?
February 24th, 2009 at 10:55 AM
@Kendra: please see the discussion throughout this blog on the dental/vision debate
February 24th, 2009 at 11:19 AM
Question about termination date of 09/01 or later
I downloaded a report: final termination-non commenced – 09/01/08 to present An individual who had a qualifying event date of 08/31/08 and a first day after loss of coverage of 09/01/08 and did not enroll shows on the report: Coverage Terminated on: 09/01/08
Will she receive renotification?
February 24th, 2009 at 12:29 PM
I would like some clarification regarding two items. 1.) The details above are including the 2% in the total “premium” and then this amount is being broken down into the 65%/35% amounts collection/paid. I have not seen new details provided by DOL/IRS with that direction – It was my understanding that the 2% admin fee would be based on the total premium and added on to the 35% premium amount to be paid by the QB. As the WEBCOBRA details are listed now the 2% would be included in such a way that would essentially have a portion of the 2% admin fee reimbursed as part of the subsidy and a portion paid by the QB. Logistically this would be a nightmare for any third party administrator and client accounting department to balance to. 2.) I was also unaware of any new direction that included dental or vision as an eligible part of the premium subsidy. I understand that based on the blogs above WEBCOBRA has made this determination based on IRS guidance from a conference call. Unfortunately, I have not seen any new formal direction on this from the IRS/DOL and our clients/employers will need more than verbal confirmation that our COBRA software provider made this determination based on a conference call. Can you direct me to any written correspondence or updated direction from IRS/DOL, as all the legislation refers to medical/health only. THANK YOU
February 24th, 2009 at 01:27 PM
Helen and all,
If the event is BEFORE September 1, 2008 then NO… and I mean NO NO subsidy. If laid off on Aug 31 then that person is screwed. Sounds stupid, but that is what our lawmakers passed in the legislation.
February 24th, 2009 at 02:13 PM
@Amanda: The IRS stated they considered the “premium” that the QB had to pay as inclusive of existing employer subsidies and existing administrative fees. We’re basing our programming on that guidance.
For the Medical/Dental, we’re following the same guidance. In my opinion, the original bills contained Medical only language, but it did not make it to the final legislation. The IRS then said “no Flexible Spending Accounts” so we’re taking that to mean no FSA, no life, no disability, and no HRA plans under the same theory. That just leaves Medical/Dental/Vision.
If you’d like to wait for more concrete guidance, you don’t really need to notify everyone on March 1st. You could wait for published guidance, but our clients (as you’ve seen on the blog) don’t want to wait.
February 24th, 2009 at 02:47 PM
Hi, On Sunday March 1, will you be sending me a FTP link to download changes and instructions? How will I know when you’ll have something ready?
February 24th, 2009 at 03:47 PM
@Tung: Later this week (Friday at the latest), you’ll receive an email with a link to instructions on where to download the patch. You’ll then run the patch that will upgrade you to TravisCobra 8.3.0.
February 24th, 2009 at 03:50 PM
@ Jesse. According to a conference call I was just on today, they indicated that medical, dental-only plans, vision-only plans, Rx-only plans, bundled plans and HRAs (but not HSAs) and some EAPs are included. HCFSA definately note included. Can you confirm?
February 24th, 2009 at 03:53 PM
@Michelle: I can’t really confirm or not, but its consistent with the chatter and guidance we’ve heard. And that matches the way we’ll be programming TravisCobra and WebCOBRA, so excellent! If you have any notes on the call that you can link to, I bet the community here would love to see them.
February 24th, 2009 at 06:07 PM
All of our clients keep employees enrolled to the end of the month in which they were terminated. So folks laid off in August 2008 are covered through August, with their first day after loss of coverage being 9/1/08. Do they qualify for the subsidy? Or, for all intents and purposes, are we looking at qualifying event dates of 9/30 and later to determine eligibility?
February 25th, 2009 at 08:35 AM
Can you tell us how this will look on the Premium Computation form? Will the participant be able to see the COBRA rate, as well as the subsidized rate? Will the premium computation form calculate the correct rate for the subsidized plans, if they also have flex.
February 25th, 2009 at 09:54 AM
@Jodi: We’ll be posting a sample ARRA Notification package later today, so you can see it then. The premium comp form will show only the subsidized rate, but the Enrollment Form will show both non subsidized and subsidized rates.
February 25th, 2009 at 09:55 AM
@Chuck: I would consider it all events of involuntary termination on/after 9/1, not necessarily their loss of coverage or their 100% subsidy end date.
February 25th, 2009 at 11:59 AM
When will the changes be made to the WebCobra system and how can I access instructions? Will there be a new category under terminations to separate voluntary vs. involuntary?
February 25th, 2009 at 12:50 PM
If the participant is not eligible for the subsidy, per the client, will there be a letter in Travis that we can send to notify them based on the QE they are not eligible and they can appeal to …? (Assuming everyone is being notified, I am sure we will get responses from some that are not eligible for the subsidy.)
February 25th, 2009 at 03:08 PM
How will these individuals be identified in Travis (i.e. checkbox) Please specify the type of reporting that will be available in Travis. When will the system upgrade be available to your clients?
February 25th, 2009 at 04:12 PM
We will install the updates to WebCOBRA this weekend and release TravisCobra on Friday; we’ll be posting instructions here for each system.
@Jodi: We won’t have a denial of ARRA letter in the first release, but it’s a good idea. I suggest submitting it to the Ideabook and we can add it to both systems if it gains traction.
February 26th, 2009 at 11:38 AM
If the customer allows the PQB to choose a lower coverage, is there a way that we can display all plans and rates in one of the letters or do we have to hard code all plan information. Also, have you posted a sample ARRA notification package yet?
February 26th, 2009 at 02:04 PM
Jesse – yesterday you said you’d be posting sample notices on Wednesday. Our clients are very anxious to have more information, if you could post those sample notices it would be really great!!!
February 26th, 2009 at 03:28 PM
Jesse,
Will the new releases allow us to bill Domestic Partners, Civil Union Partners and same sex spouses at 100% of COBRA rates while billing the employee at 35% of COBRA rates? Some ERISA lawyers think that DP’s, etc. are not eligible for the subsidy even if the employee is.
February 26th, 2009 at 03:59 PM
@Sharon: You will need to furnish either attachments or hard code the plan information
@Cara: We just posted them
@Chuck: You could add the partners as part of their own group and exclude them from the subsidy.