Bill Would Extend COBRA Coverage by Six Months

The Extended COBRA Continuation Protection Act of 2009 (H.R. 3930) has been introduced to extend by six months the maximum COBRA continuation coverage period. See www.dcemploymentlawupdate.com/2009/10/articles/employee-benefits/bill-would-extend-cobra-coverage-by-six-months/

WHAT IS COBRA?
COBRA stands for Consolidated Omnibus Budget Reconciliation Act. It was passed by congress in 1986 which amended the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise would be terminated do to the of employment. It covers former employees and retirees as well as their spouses and dependent children. It provides the right to temporary continuation of health coverage at group rates. The coverage is extended to18 months for the person whose employment ended [in some cases 36 months in the case of death or divorce]. The coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. It is ordinarily less expensive, though, than individual health coverage. This can be a burden for the person who unexpectedly loss employment for it creates an unexpected financial burden; they not only loose income but health care expenses increase due to the former employee paying the former employer’s share of health insurance.

The American Reinvestment and Recovery Act [ARRA] passed in February 2009 gave relief to employees who lost their job as a result on the recession from September 1, 2008 to December 31, 2009. It gave eligible individuals a 65% subsidy on the COBRA premiums. The Federal government through a tax credit on the payroll tax returns would reimburse the former employers.

WHEN WILL IT END?
The subsidy as part of ARRA is to end on December 31, 2009. However, the Extended COBRA Continuation Protection Act of 2009 would extend COBRA benefits in three ways. First, the bill would extend from 9 to 15 months the total allowable time an unemployed worker can receive COBRA premium assistance. Second, the bill extends this assistance to individuals who are involuntarily terminated between January 1 and June 30, 2010. Third, it would extend eligibility for traditional COBRA coverage an additional 6 months, from 18 to 24 months, for individuals terminated at the beginning of the economic recession in 2008. No extended COBRA premium assistance or extended COBRA benefits would extend beyond December 31, 2010.

HOW DOES THIS AFFCT EMPLOYES/EMPLOYERS?
This will be a tremendous assistance to employees who lost their job as the result of the recession. With more people, being added to the unemployment rolls and more people applying for extended unemployment benefits, extending the subsidy and including people who lost employment after December 31, 2008 can make a big difference in their health and the health of their families.

This should have no impact on most employers for they reduce by the amount of the subsidy the payroll tax liability on the quarterly payroll tax returns and payroll tax deposits during the quarter.

ANYTHING EMPLOYEES SHOULD DO BEFORE THE END OF THE YEAR?
The only thing employees should do is to stay in contact with the COBRA administer. For many companies that is a company hired specifically for administrating COBRA premiums and not the HR department of the company. The employee should automatically get communications from the administrator, but it is a good practice for the employee to be proactive and find out who the COBRA administrator is. Giving them a call is a good way to make sure the employee does not “fall in-between the cracks”

Contact me for more information or visit me on the web at www.TheJohnEllisCompany.com