American Recovery & Reinvestment Act of 2009 and 2010 DOD ACT

The American Recovery & Reinvestment Act of 2009 (ARRA) signed into law on February 17, 2009 and 2010 DOD ACT include significant changes to COBRA Administration, including a COBRA premium reduction for employees involuntarily terminated between September 1, 2008 and March 31, 2010.  The law provides for an employer premium subsidy and a special election period for these employees and qualified beneficiaries.

The AARA provides for a 65% reduction in COBRA premiums for up to nine (9) months, for certain assistance eligible individuals who meet all of the following requirements:

1. Is eligible for COBRA continuation coverage at any time during the period beginning September 1, 2008 and ending March 31, 2010;
2. Timely elects COBRA coverage (when first offered or during the additional election period described below);
3. Whose qualifying event for COBRA coverage is the employee’s involuntary termination (except for gross misconduct) during the period beginning September 1, 2008 and ending March 31, 2010; and
4. Is not eligible for other group health coverage (such as a spouse’s plan) or Medicare.

The following notice applies to all group health plans subject to Federal COBRA law’s continuation coverage requirements, but does not apply to other group health plans.

For additional information on COBRA and the COBRA subsidy under the ARRA, you can visit the U.S. Department of Labor Employee Benefits Security Administration’s website at www.dol.gov/COBRA.  You may also contact a Department of Labor benefits advisor at 1-866-444-3272.  If you have questions about your UHA plan, please contact Employer Services at (808) 532-4007.

Notice Requirements

There are two new mandatory notice requirements under the ARRA that Employers, as plan administrator, must provide to certain employees.

1. Employers must provide notice about the availability of the COBRA premium reduction to all employees who have a qualifying event during the period from September 1, 2008 through December 31, 2009.  Employers may provide notices separately or along with notices they provide following a COBRA qualifying event. 
• This notice must go to all individuals, whether they elected COBRA coverage or not, who had a qualifying event from September 1, 2008 through December 31, 2009. 
2. Employers must send notice regarding the special election period described below to all individuals eligible for the special COBRA election. 
   • This notice must be provided within 60 days following February 17, 2009 (i.e. no later than April 18, 2009).  Under the ARRA, the Department of Labor is required to develop model notices by March 29, 2009 to assist employers in fulfilling the new notice requirements.  Please refer to http://www.dol.gov/ebsa/cobra.html for this model notice.

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Special COBRA Election Opportunity

Under the ARRA, individuals who were involuntarily terminated (except for gross misconduct) from September 1, 2008 through February 16, 2009, who did not elect COBRA when it was first offered or who did elect COBRA but are no longer enrolled, have a new COBRA election opportunity.

 This new election period is effective March 1, 2009.  Notified individuals must complete the following required forms and submit to the employer within 60 days after receiving the required notice regarding the special election:

• COBRA Election Form (for new enrollees)
• COBRA Enrollment Form (for new enrollees)
• COBRA Subsidy Benefit Coverage Form (if applicable) – for new & existing COBRA Members
• Request for Treatment as an Assistance Eligible Individual Form– for new & existing COBRA Members

The special election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months).   

Payment of COBRA Premiums

The ARRA treats assistance eligible individuals who pay 35% of their COBRA premium as having paid the full amount of the premium.  The premium reduction (65% of the full COBRA premium) must be paid by the employer but is reimbursable to the employer as a credit against certain employment taxes.  If an employer receives a 35% payment from an assistance-eligible individual, the employer is required to make the remaining 65% payment. 

Because the ARRA places the burden on the employer to pay 65% of an eligible employee’s COBRA premium and recover that amount through a reduction in employment taxes, UHA WILL bill the employer for 100% of the COBRA premium for assistance eligible individuals who qualify for the subsidy when we receive written verification from the employer as well as completed required Forms as listed below. 

The Employer will need to:

1. Collect completed and signed:
• COBRA Election Form
• COBRA Enrollment Form
• Request for treatment as an Assistance Eligible Individual Form
2. Collect the 35% of the premium from Assistance Eligible COBRA members
3. Remit 100% of the premium to UHA along with copies of the completed forms (listed above). This is a procedural change for some employer groups as a result of ARRA. 

UHA WILL NOT bill and accept COBRA premiums directly from any COBRA member who qualifies for the subsidy.  There will be no change in procedures for those COBRA members who do not qualify for the subsidy (i.e. UHA will continue to bill and collect the COBRA premium directly from those members).

Because ARRA became effective so quickly, individuals eligible for a premium reduction may have already paid their full COBRA premiums for months in which they are eligible for a reduction.  To rectify this, assistance eligible individuals who have already paid their full COBRA premium for March, April or later and who become eligible for the COBRA premium reduction as of March 1, 2009 (or later), should receive a refund or credit against future premiums for the over payment.  Due to the structure of the ARRA, the employer is responsible for any refund or offset owed to a COBRA member, even if the member paid UHA directly for his or her March or April premium. 

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UHA will assist employers in identifying COBRA members who may be entitled to a refund or credit to premiums paid directly to UHA, employers will be provided with the following reports:

• All of the group plans current COBRA enrollees
• All COBRA enrollees who have submitted payment for March (or later) and the amount paid

The first set of such reports will be sent to employers no later than April 10, 2009.

Premium Reduction Ineligibility Form

IMPORTANT: If COBRA members fail to provide notification of becoming eligible for other group health plan coverage or Medicare AND continue to pay reduced COBRA premiums they could be subject to a fine of 110% of the amount of the premium reduction.

COBRA Members paying reduced premiums are to use the form listed below to notify former employers (as the plan administrator) that they are eligible for other group health plan coverage or Medicare:

• Premium Reduction Ineligibility Form

Eligibility is determined regardless of whether or not the other coverage is accepted or declined and does not include any time spent in a waiting period.

UHA recommends that you consult professional advisors to review other requirements of the law to determine how the ARRA applies to you.  Please note that these guidelines & procedures only apply to UHA; other insurance carriers may be administering this program differently and should be contacted directly.
For additional information on COBRA and the COBRA subsidy under the ARRA, you can visit the U.S. Department of Labor Employee Benefits Security Administration’s website at www.dol.gov/COBRA.