COBRA health insurance premium subsidies would be extended and expanded under a new jobs bill being put together by Senate Majority Leader Harry Reid, D-Nev.

In its current version, the draft bill would extend the COBRA premium subsidy to involuntarily terminated employees another 10 months, so employees laid off through year-end would be eligible for the 65% subsidy for up to 15 months.

Without an extension, employees laid off after March 1 would not be eligible for the subsidy.

“There are people who are losing their jobs and they need the ability to buy insurance,” Sen. Reid said on the Senate floor Wednesday.

Separately, the Senate on Thursday may begin to consider H.R. 1586, which among other things, would extend the subsidy through March 28. That measure is considered a stopgap while federal lawmakers consider a longer extension.

“There is virtually no doubt that a longer extension will follow,” said Frank McArdle, a consultant with Hewitt Associates Inc. in Washington.

Sen. Reid’s draft bill also would allow employees who first lost group health insurance coverage due to a reduction in hours and then were involuntarily terminated to receive the COBRA premium subsidy, assuming certain conditions were met.

Other provisions in the draft bill would give employers more time to fund their pension plan obligations, something business groups have sought for more than a year. Without such relief, employers will face huge increases in contributions to their plans, which have been battered by low interest rates and the plunge in the equities markets.

It isn’t known when Sen. Reid will formally introduce the jobs bill. Previously, the Senate majority leader stripped the COBRA subsidy and other provisions from a prior jobs bill in favor of a more narrowly focused measure, which the Senate passed Wednesday. At the time, Sen. Reid said some of the provisions, like the COBRA subsidy, would be reinserted in a series of bills he would introduce at a later date.

Tags: COBRA subsidy, COBRA Subsidy 2010, COBRA Subsidy Expansion, COBRA Subsidy Extension

President Obama has signed a bill that extends federal COBRA health insurance premium subsidies for the unemployed.

The Senate, in a rare Saturday session, passed H.R. 3326 on an 88-10 vote. The measure—a military spending bill that the House passed earlier last week—includes a provision that extends the nine-month, 65% premium federal subsidy by six months. The change applies to those who are involuntarily terminated through Feb. 28, 2010.

Previously, employees who lose their jobs after Dec. 31 would have been ineligible for the subsidy.

The legislation also provides another six months of subsidized coverage for beneficiaries whose nine-month COBRA premium subsidy has run out.

In addition, the legislation gives beneficiaries whose subsidy expired and who didn’t pay the full premium the opportunity to receive retroactive coverage. For example, a beneficiary whose nine months of subsidized coverage ran out Nov. 30 and who didn’t pay the unsubsidized premium for December could pay his or her 35% share in January and receive COBRA coverage for December.

The legislation also requires employers to notify current and future COBRA beneficiaries of the new 15-month premium subsidy.

The fate of the legislation has been followed closely by terminated workers—eager to know whether the subsidy will be extended—as well as employers who need to tell beneficiaries the COBRA premium they should pay.

The legislation makes clear that employers can offset future COBRA premiums or issue refund checks for beneficiaries who overpaid their COBRA premium. That could happen if a beneficiary whose subsidy ran out in November paid the full premium rather than the 35% share in December.

Tags: COBRA Legislation Extension, COBRA stimulus, COBRA stimulus package, COBRA subsidy, COBRA Subsidy Expansion, COBRA Subsidy Extended, COBRA Subsidy Extension, Obama COBRA Subsidy

The American Recovery and Reinvestment Act of 2009 allows a credit against employment taxes for providing COBRA premium assistance to assistance-eligible individuals. As deadlines approach for employers to file their quarterly payroll taxes, groups may be asking about the process for reporting the COBRA and state continuation premium subsidies.

The 65 percent of the premium not paid by assistance-eligible individuals is reimbursed to the employer or other entity maintaining the group health plan. The federal government provides this reimbursement through a credit against employment tax liabilities.

Recent guidance from the IRS indicates that anyone claiming the credit for COBRA assistance payments must maintain the appropriate information to support their claim. Please note that employers who are not subject to COBRA are not responsible for claiming the subsidy. For groups for whom we are the COBRA administrator, all the necessary information has been included in your monthly premium reconciliation.

Information is available on the IRS Web site at www.irs.gov and in Publication 15 (Circular E), Employer’s Tax Guide.

Tags: COBRA Employer Subsidy Credit, COBRA subsidy, COBRA Subsidy Employment Taxes, Employer Group COBRA Subsidy, The American Recovery and Reinvestment Act of 2009

The Department of Labor says it is working on guidance regarding the newly created subsidy for COBRA premiums.

The American Recovery and Reinvestment Act of 2009 (ARRA) provides for a 65 percent subsidy for COBRA continuation premiums for up to 9 months for workers who have been involuntarily terminated, and for their families.

The subsidy terminates when the covered individual is offered any new employer-sponsored healthcare coverage or becomes eligible for Medicare. Workers who were involuntarily terminated on or after September 1, 2008, and before February 17, 2009, but failed to initially elect federal COBRA continuation coverage, have an additional 60 days to elect federal COBRA and receive the subsidy.

To qualify for the subsidy, individuals must meet all of the following requirements:

• Is eligible for COBRA continuation coverage at any time during the period beginning September 1, 2008 and ending December 31, 2009;
• Elects COBRA coverage (when first offered or during the additional election period), and
• Has a qualifying event for COBRA coverage that is the employee’s involuntary termination during the period beginning September 1, 2008 and ending December 31, 2009.

The ARRA provides that an assistance-eligible individual (AEI) is treated as having paid the full premium required for COBRA continuation coverage for a coverage period if the individual pays 35 percent of the premium. The subsidy program is effective for the first coverage period beginning on or after February 17, 2009. In most cases (plans with calendar month coverage periods), this will be March 1, 2009.

The legislation requires that information on the COBRA subsidy be included in COBRA notices. Under the legislation, the Department of Labor must create a model notice within 30 days of February 17, 2009.

Tags: COBRA Recovery and Reinvestment Act laws, COBRA subsidy

The U.S. House and Senate will vote on a compromise $790 billion stimulus package that includes subsidies for 65% of the COBRA health insurance premiums paid by laid-off workers, under a hard-fought conference report unveiled late Feb. 12.

The final version of the American Recovery and Reinvestment Act, which followed intense negotiations between leaders of the two chambers, is smaller than either the $819 billion stimulus passed by the House or the $838 billion package cleared by the Senate. Completion of the conference report for H.R. 1 sets up a planned Feb. 13 House vote, with the Senate to move the package either later in the day or over the President’s Day weekend. Following the vote, Congress will stand in recess until Feb. 23.

The final COBRA provisions, which were welcomed by the health insurance industry, are more generous than the 50% subsidy in the Senate version, but do not last as long as the 12-month subsidy included in both prior versions of the bill. Estimated to cost $24.7 billion, the provision would provide aid to an estimated 7 million involuntarily terminated between Sept. 1, 2008 and Dec. 31, 2009 to pay continue paying health insurance premiums through the 23-year-old Consolidated Omnibus Budget Reconciliation Act program.

COBRA allows employees who are terminated or leave their jobs voluntarily to remain in their former employer’s group health plan for up to 18 months, which can be extended to 36 months for those with extenuating life circumstances. Employers are permitted to charge COBRA enrollees up to 102% of the true cost of group health premiums, which average more than $1,000 per month.

According to the final report, the aid would be available for up to nine months, or until the terminated worker receives an offer of any new employer-sponsored health care coverage or becomes eligible for Medicare. Subsidies would not be available to those who earn more than $125,000 a year, or $250,000 per household.

The final version also strips out a provision opposed by the National Business Group on Health, which represents large employers, that would have allowed beneficiaries older than age 55 and those who have worked for the same employer for a decade to retain COBRA coverage until they become eligible for Medicare.

The measure also includes $17.2 billion in funding for health information technology infrastructure and an additional $2 billion in affiliated grants and loans. The bill sets a goal of seeing 90% of doctors and 70% of hospitals adopt electronic health records within the next decade, but it couples that with more stringent regulations on the transmission of identifiable health information. Insurers have protested that the bill’s notification requirements for security breaches were broadly worded, that it authorizing state attorneys general to enforce federal privacy standards and that new regulations could restrict health promotion, disease management and care coordination programs.

However, groups such as the Blue Cross Blue Shield Association and America’s Health Insurance Plans welcomed $1.1 billion in new funding for comparative effectiveness research. The BCBSA has proposed creation of an industry-funded institute to offer recommendations on the most effective and cost-efficient medical treatments.

“With comparative effectiveness, patients and providers will be able to assess drugs, technologies, and treatment options and make decisions that best reflect the patients’ needs and preferences,” AHIP President Karen Ignagni said in a statement. “We applaud efforts to address this important priority in the current economic recovery bills.”

The final package mostly eliminates a $54 billion provision, seen as potentially beneficial particularly to financial guaranty and mortgage guaranty insurers, that would have allowed corporations to carry back net operating losses for 2008 and 2009 against taxes paid in the prior five years. The final version offers a much more limited, $947 million carryback open only to businesses with gross receipts of less than $15 million, which could potentially be helpful to some agencies and small carriers.

Other small business tax provisions of potential benefit to agencies include $41 million to allow a one-time write-off of up to $125,000 in capital expenses; $829 million for raising the small business stock sale capital gains exclusion to 75% from 50%; and $415 million to temporarily reduce the built-in gains holding period for S corporations from 10 years to seven years.

Tags: COBRA, COBRA laws, COBRA legislation, COBRA stimulus package, COBRA subsidy