The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end. For example this occurs during a voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death and divorce. COBRA outlines how employees and family members may elect continuation coverage. It also requires employers and plans to provide notice of COBRA coverage opportunities and any amendments.

There have been very recent changes to COBRA premiums which are discussed in detail below. If you have any further questions about these changes or COBRA, please call Teamsters Local 916 at (217) 522-7932 or go to http://www.dol.gov/ebsa/cobra.html.

COBRA PREMIUM REDUCTION

President Barack Obama signed the American Recovery and Reinvestment Act of 2009 (hereinafter referred to as ARRA) which directly reduces COBRA premiums. The ARRA provides for premium reductions and additional election opportunities for employees who have been “involuntary terminated.” The goal of this provision is to assist workers who have been forced out of their jobs as a result of the recession.

The premium reduction applies to COBRA health coverage beginning on or after February 17, 2009 – date when ARRA became law. Once an employee applies for the premium reduction, the premium reduction can only last nine (9) months. For example, if an employee elects to take the premium reduction on March 1, 2009 they can only receive that reduction until December 1, 2009.

The premium reduction is not retroactive. Therefore, if an employee made any COBRA premiums prior to February 17, 2009 they will not receive a reimbursement.

The Reduction:

-       Eligible Individuals pay only 35% of their COBRA premiums and the remaining 65% is reimbursed to the coverage provider through a tax credit.

-       The reduction is available as of your first period of coverage after Feb 17, 2009. However, if an employee receives the premium notice after this date and makes full payment instead of the reduced amount, that person will either be reimbursed for the overpayment or receive a credit toward premium payments (to be used w/in 180 days). This will be paid by either former employer or insurer.

Eligible Employees (“Assistance Eligible Individuals”):

-       Eligible for COBRA between 9/1/08 and 12/31/09 due to involuntary termination (does not apply to reduction in the hours worked, transition between jobs, death, divorce, and other life events).

-       Elects COBRA coverage within 60 days after notified of right to elect COBRA (or additional election period applies)

-       Employees have to be currently working zero hours (reduced hours does not entitle to premium reduction.

Excluded Employees:

-       Employees of companies with less than 20 employees

-       Employees who are eligible for other group health coverage (ie spouse’s plan or new employer’s health insurance)

-       Employees who are eligible for Medicare

-       Employees terminated for gross misconduct

-       If individual earns more than $145,000 (or $290,000 for families) the amount of premium reduction must be repaid. If Employee earned between $125,000 -$145,000 during tax year that COBRA reduction is sought, the premium is reduced proportionately

How to Elect the COBRA Coverage and Reduction:

-       Employee must enroll in COBRA coverage and fill out premium reduction forms provided by health plan. Health plan must notify you within 14 days regarding COBRA reduction eligibility. If denied premium reduction you can file appeal with either Dept of Labor (private sector employers) or Health & Human Services (public sector employers). The Election for continuation of coverage should be provided to you already. If not, go to Central States’ website (http://www.centralstatesfunds.org/csf/) or your respective insurance provider to find the form.

-       (Additional Election Period) If you were involuntarily terminated between 9/1/08 – 2/16/09 but failed to initially elect COBRA coverage, you will receive a second opportunity to elect COBRA and receive the premium reduction. The employer must inform you of this right by 4/18/09 and the employee has 60 days to respond. However, you can call former employer/insurer and request the application prior to 4/18/09 but coverage can only begin on 2/17/09 at the earliest.

When Does the Premium Reduction Terminate:

The earliest of one of the following:

(a)   Your employer no longer offers any group health plan to employees

(b)   You fail to make your premium payment;

(c)    Become eligible for health care through another group plan;

(d)   Become eligible for health care through Medicare;

(e)   9 months of COBRA premium reduction are used by employee

(f)     COBRA coverage duration expires.