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COBRA Subsidy Extended
May 04, 2011

COBRA Subsidy Extended in Defense Appropriations Act of 2010

As we reported last spring, one of the more significant items for employers in the American Recovery and Reinvestment Bill of 2009 (ARRA) was a temporary federal subsidy of COBRA premiums that employees pay to continue their health care coverage after they lose their jobs. ARRA provided that effective March 1, 2009, the government would temporarily pick up 65% of the total cost of the COBRA continuation premium that an eligible employee would otherwise have to pay for the first nine months of continued coverage. This subsidy was limited to employees who were “involuntarily terminated” from employment between September 1, 2008, and December 31, 2009.

ARRA was amended on December 19, 2009 by the Department of Defense Appropriations Act of 2010 to extend the COBRA premium reduction eligibility period to cover involuntary terminations occurring on or before February 28, 2010, and to increase the maximum period for receiving the subsidy from nine to 15 months.

Individuals who reached the end of the reduced premium period before the legislation extended it to 15 months will have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay the 35% of premium costs by February 17, 2010, or, if later, 30 days after notice of the extension is provided by their plan administrator.

The amendments also provided for additional notices to eligible employees. The amended notice requirements include a requirement for Plan administrators to provide notice about the changes made to the premium reduction provisions to individuals who have already been provided a COBRA election notice (unless the election notice included the updated premium reduction information).

COBRA and the amendments providing for the federal premium reduction are complicated. This notice is not intended to provide comprehensive or detailed guidance. We strongly recommend that employers immediately contact their COBRA Administrator to ensure timely compliance with the amended COBRA requirements.

If you have questions regarding this issueor any labor/employment issue, please feel free to contact Peter R. Rich, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or any member of Spilman’s Labor & Employment team.


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