Here’s the latest scoop on COBRA subsidy
December 9, 2009 by Christian SchappelPosted in: COBRA, Employment law, Health care, Money, Pay and benefits, Special Report - Benefits
New guidance has been issued by the Department of Labor to end the confusion surrounding COBRA subsidy eligibility.
While the feds are offering up a 65% nine-month COBRA premium subsidy to workers involuntarily terminated in the period between Sept. 1, 2008 and Dec. 31, 2009, some who lost their jobs during that time won’t be eligible.
What would keep a terminated employee from being eligible for COBRA? Being covered by their former employer’s health plan through Dec. 31, 2009.
As a result, the worker wouldn’t be eligible for COBRA until Jan 1, 2010 — just missing the cutoff for the subsidy.
On the other hand, if the person was terminated by Dec. 31 and was eligible for COBRA, he or she could receive the subsidy for a full nine months — even if that nine-month period extends well into 2010.
Two bills have been introduced to extend and even expand the COBRA subsidy, but the fate of the legislation remains unclear.
Tags: COBRA, COBRA subsidy, department of labor, dol, legislation
December 9th, 2009 at 5:45 pm
my cobra subsidy ran out on nov 30th. I am a widow who was terminated in Feb. i have had to send in a cobra full premium payment to my company and my unemployment doesn’t cover rent and this full cobra amount. could you provide the house bill # so i can keep track on c-span ?? thanks ronda also could this be forwarded to all members of the house…we need this approved as soon as possible… help!!!!
December 10th, 2009 at 10:05 am
House Bill (H.R. 3930)
Senate Bill (S. 2730)
December 10th, 2009 at 4:39 pm
Still confusing!! I read it as the termination of employment between those dates, not termination of coverage as an employee. With my thinking if the termination of employment was in June 2009 for example, I would think that the subsidy would at least be for 4 months. I would consider the first 6 (July – December) of the 10 months of subsidy as 100% subsidized in a way just without the tax credit to the employer. Then the first 4months of COBRA would be the remaining 4 months of 65% subsidy.
December 10th, 2009 at 5:21 pm
I also thought it was the date of termination that determined eligibility. If termed any day in Dec 2009 then subsidy would be given for 9 months, starting with 1/10, if that’s when COBRA started.
It makes sense that Ronda’s subsidy ran out 11/30, that would be nine months from the start of the problem (3/09-11/09)
@Joanne, if the person was termed in 6/09, then the subsidy should be for nine months from the start of the COBRA period, which would be 2/10
December 10th, 2009 at 8:44 pm
The original subsidy language was written based on termination of coverage, not termination of employment. So if you were a full time person and lost coverage because the company changed your employment status to part time and you became ineligible for insurance, you were both COBRA and subsidy eligible. If you have a severance and stay on benefits as an active employee past 12/31/09, no subsidy for you.
Our benefits end the end of the month in which employment or full time status ends, not on the term date. If your company’s benefits end the date of termination then someone terminating in December 2009 is eligible for the subsidy. Someone on our plan would not be eligible because they would not be eligible for COBRA until January 2010 which is past the allowable period.
No one will like it but at some point, there will be a cutoff date. I happen to think the economy and job situation would warrant keeping the subsidy through 6/30/10 at least but people losing coverage on 7/1/10 will then not be eligible for it by 1 day. So unless the government makes the subsidy permanent, someone will always lose out.
December 11th, 2009 at 9:27 am
Patricia,
It is based on termination of employment. This is why the involuntary termination term is used. Employees who resign from a company cover also stops but they are not an eligible
If your status changed from full time to part time. You are still an employee of the company but you are not eligible for the subsidy.
Department of Labor states:
To be considered an “Assistance Eligible Individual” and get reduced premiums you:
-MUST be eligible for continuation coverage at any time during the period from September 1, 2008 through December 31, 2009 and elect the coverage;
-MUST have a continuation coverage election opportunity related to an involuntary termination of employment that occurred at some time from September 1, 2008 through December 31, 2009;
-MUST NOT be eligible for Medicare; AND
-MUST NOT be eligible for coverage under any other group health plan, such as a plan sponsored by a successor employer or a spouse’s employer.*
December 11th, 2009 at 4:35 pm
Patricia is spot on correct. An individual must be involuntarily terminated from employment AND be eligible for COBRA coverage during the period from September 1, 2008 and December 31, 2009. In fact the instructions offered above by EB say exactly that.
December 12th, 2009 at 11:05 am
i was cobra eligible 1/01/10 missed cut off by one day lost job 12/03/09 and had coverage until 12/31/09 if bill is extended would i be eligible.
December 15th, 2009 at 1:46 pm
Sorry, aka, but Patricia is not spot on correct in stating termination of coverage. EB is correct that the law is written involuntary termination of employment. It is intended for just that severe loss of economy (rather than voluntary term or reduced work hours, etc.)
December 15th, 2009 at 3:30 pm
CB,
Let’s be clear on what Patricia was repsonding to in her comments. The previous poster had just stated that they ” thought it was the date of termination that determined eligibility”. Patricia merely clarified that an involuntarily terminated individual becomes eligible fo the subsidy based on the date coverage terminates not the date that employment terminates. They are not always the same.
December 15th, 2009 at 7:34 pm
I apologize. I was not clear. If you reduce someone’s hours to eliminate their benefits and they quit due to this change in employment, they are still an assistance eligible individual. I suppose they treat it like constructive discharge. You cannot reduce someone to 1 hour per week in order to not give them the subsidy because you got them to quit.
But yes my main point is the subsidy eligibility is based on when their insurance as an active employee ends, not the date of termination.
December 15th, 2009 at 7:43 pm
See page five of IRS notice 2009-27
Q-1. What circumstances constitute an involuntary termination for purposes of
the definition of an assistance eligible individual?
A-1. An involuntary termination means a severance from employment due to
the independent exercise of the unilateral authority of the employer to terminate the
employment, other than due to the employee’s implicit or explicit request, where the
employee was willing and able to continue performing services. An involuntary
termination may include the employer’s failure to renew a contract at the time the
contract expires, if the employee was willing and able to execute a new contract
providing terms and conditions similar to those in the expiring contract and to continue
providing the services.
In addition, an employee-initiated termination from employment
constitutes an involuntary termination from employment for purposes of the premium
reduction if the termination from employment constitutes a termination for good reason
due to employer action that causes a material negative change in the employment
relationship for the employee.
January 22nd, 2010 at 7:04 pm
Our Paid Time Off policy states if an employee does not report to work, receive authorization for time off or call for 3 consecutive days it is considered a voluntary quit.
We have an employee that falls under this category, in fact he was gone an entire week without a call. He was not injured or suffering from an illness that prevented him from coming in. He was very sorry and knows that he didn’t follow policy and asked for a second chance which of course was not granted.
Does this fall under the category of an involutary termination according to the IRS definitions? Has anyone gone through a DOL appeal with this situation and if so, what was the outcome?
January 28th, 2010 at 5:56 pm
Wife was terminated 12/30/09, but paid through the 31st. no job as of 5:00 PM PST 12/31/09. Does this mean she does not qualify for the re-imbursement? We were told she was. Her company is out of biz. She is getting Cobra bills from Blue Cross, but they are full payment? Is there any way to resolve this or are we in trouble because of the actual day of termination 12/31/09? Any help would be appreciated.
January 29th, 2010 at 10:14 am
Peter
You mention your wife was terminated and that the company is out of business. One could assume that her employment was terminated by the closure of the business but you don’t specifically state that to be the case. IF her termination was involuntary (in other words she did not quit or was not terminated for some act of gross misconduct) she should be eligible for the reduced COBRA rates.
Although I am not qualified to provide legal advice, here is what I would do:
If there is no one to contact at the closed business you may want to contact Blue Cross. If Blue Cross tells you that the company did not designate your wife’s termination as involuntary I believe she can request an expedited review of the denial from the Department of Labor. The DOL claims that a determination on such an appeal will be made within 15 business days after the application for review is received.
February 3rd, 2010 at 9:29 am
Peter
According to some information I read last weekend COBRA is not available when a company shuts down the business. I had never run into this before so I must say that my response above probably does not apply to your wife’s situation.