COBRA

COBRA premium reductions extended
to May 31, 2010.

Many people have lost their jobs and health insurance in this difficult economy. The federal program which reduces the cost of COBRA premiums has been extended through May 31, 2010. The program allows you to pay 35% of the monthly premium for COBRA coverage if you have been "involuntarily separated" from your job between September 1, 2008 and May 31, 2010. The premium reductions last up to 15 months.

There are income restrictions, described below, and your former employer must still be in business and offering health insurance to employees remaining on the workforce.

This program is not available if you are able to obtain coverage through a spouse's plan or are on Medicare.

Your former employer should automatically provide additional information to you. You also can proactively contact your former employer's human resource department or your health plan directly to learn how to participate in the subsidy program. If you need further assistance contact an EBSA Benefits Advisor toll-free at 1-866-444-3272. More information about this program is available at www.dol.gov/COBRA .

While you are on the COBRA premium reduction program, you remain able to switch among the health plans offered by your former employer. You also retain the ability to switch medical groups and doctors.

This is available for people who meet the following Eligibility Criteria:

Must be eligible for COBRA due to an involuntary job loss between September 1, 2008 and May 31, 2010.
Have no other coverage available through another group health plan or Medicare.
Have modified gross income less than $145,000 (single) / $290,000 (filing jointly).

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Who Is Not Eligible?

If you can obtain insurance from another group plan, such as a spouse’s insurance or from Medicare, you will not be eligible for this program.

There also are income restrictions that impact the amount of any reduction. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium reduction that must be repaid is reduced proportionately.

If an individual’s modified adjusted gross income for the 2009 tax year exceeds $145,000 (or $290,000 for joint filers), then the amount of any premium reduction during that tax year must be repaid.

Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits. If you think that your income may exceed the amounts above, consult your tax preparer or view the IRS information related to the stimulus plan here.

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What if I am Denied?

If the plan determines that you are not eligible for the premium reduction, you can request an expedited review of the denial. The Department of Labor will handle appeals related to private sector employer plans subject to ERISA’s COBRA provisions. The Department of Health and Human Services will handle appeals for Federal, State, and local governmental employees, as well as appeals related to group health insurance coverage provided pursuant to state continuation coverage laws. The California Department of Insurance also may process complaints related to Cal-COBRA. The Departments are required to make a determination regarding your appeal within 15 business days after receiving your completed application for review.

Appeals to the Department of Labor must be submitted on a U.S. Department of Labor application form. The online appeal form now is available from the Department of Labor. The website address is www.askebsa.dol.gov/COBRA. If you believe you have been inappropriately denied eligibility for the premium reduction, you may also wish to speak with an Employee Benefits Security Administration Benefits Advisor at 1-866-444-3272 before filing this form.
Appeals by former employees of small firms may be made with the California Department of Insurance Consumer Hotline at (800) 927-4357 or by visiting www.insurance.ca.gov

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How the New Program Works for COBRA Beneficiaries

When you were first hired you should have received an informational packet identifying your employer’s COBRA plan administrator. That administrator will send you a notice about COBRA eligibility and the new program. This notice must go to all individuals, whether they have COBRA coverage or not, who had a qualifying event from September 1, 2008 through May 31, 2010. Individuals eligible for the special COBRA election period also must receive a notice informing them of this opportunity. You also may wish to proactively contact your plan administrator.

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Can I Switch Health Plans?

You may switch plans during the annual open enrollment period offered to active employees. If your former employer allows it, you also may be able to switch to a lower cost plan now; however, the plan can not be just for dental, vision, a health flexible spending account or treatment that is furnished in an on-site facility maintained by the employer.

How it Works for Employers.

Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit against certain employment taxes. If the credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the employer, insurer or plan for the excess. The U.S. Labor Department recently released model notices for the COBRA subsidy under the American Recovery and Reinvestment Act of 2009. Find details of this release at http://www.dol.gov.

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What is COBRA?

COBRA gives workers who lose their jobs, and thus their health benefits, the right to purchase group health coverage provided by the plan under certain circumstances.

If the employer continues to offer a group health plan, the employee and his/her family can retain their group health coverage for a period of time by paying group rates. The COBRA premium will be higher than what the individual was paying while employed because the individual will pay up to 102% of what the employer pays, however, this coverage may be less than what is available for private, individual health insurance coverage.

The plan administrator must notify affected employees of their right to elect COBRA. Typically, the employee and his/her family each have 60 days to elect the COBRA coverage, otherwise they lose all rights to COBRA benefits. Exceptions may be made for individuals who fit the eligibility requirements of the stimulus program.

COBRA usually does not apply to plans sponsored by employers with fewer than 20 employees; however, the passage of California AB 23 extends this same eligibility to small firms. Exceptions include firms that have gone out of business or that have discontinued offering health insurance for all remaining employees.

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