COBRA Notification Updates with Stimulus

It is not often you hear stimulus and COBRA in the same sentence but consider that a gift from the federal government. President Obama signed the American Recovery and Reinvestment Act of 2009 yesterday. It is a 600 + page new law intended to stimulate growth and jobs in light of the economic downturn. Part of the law directs the creation of Recovery.gov - a Web site that will be updated in accordance with the new requirements, including issuance of contracts needing new employees.

For employers and HR professionals specifically, Title III of the Act - Health Insurance Assistance for the Unemployed - provides offsets for COBRA coverage to employees who have been involuntarily terminated (fired or laid off, unless terminated for gross misconduct) between September 1, 2008 and December 31, 2009. Some of the specifics:

1. Employers must either amend or include an additional notice with COBRA notifications to employees. The law specifies the content of this notification but requires the Department of Labor and other agencies to coordinate efforts to prepare model notifications within the next 30 days. The Chamber will track these notices and ensure our forms are updated accordingly.

2. The bill provides COBRA payment assistance for up to 65% of the premium for employees involuntarily terminated by their employers, starting March 1, 2009. The payment will be offset through payroll taxes. The law outlines which entities are eligible for reimbursement by the federal government:- If an individual had paid the full COBRA premium for the first 60 days after February 17, 2009 (the date of the bill's enactment), employers must reimburse the individual for any premium paid in excess of 35% or provide a credit to the individual to reduce one or more of the individual's premium payment. These employers will be reimbursed by the federal government.

3. Employers with 2-19 employees covered by Cal-COBRA are impacted by this new law as well. However, the premium repayment will be handled through your insurance carrier instead of through your payroll system.

These new requirements implicate the Internal Revenue Code, ERISA and other federal laws that are complex with detailed requirements. In addition, a full analysis of these new requirements is not yet complete so there is significant confusion in this area. As such, it is imperative that you consult with a specialist in this area to fully understand your obligations under this new law.

For employers covered by Cal-COBRA (2-19 employees) - be sure to get assistance from legal counsel regarding how these changes may impact your business.

Comments

[Cynthia]

How does the American Recovery and Reinvestment Act of 2009 effect small businesses when former employees participate in Cal-COBRA? Cal-COBRA premium payments are paid directly to the insurance carrier and are not collected and processed by the employer. Is the insurance carrier responsible to give reimbursements to the former employees who are enrolled in Cal-COBRA?

[Chris Eddy]

Cynthia,

You should contact your benefits provider to answer your question.

[Heidi]

I have been unemployed from the construction industry in California since 10/2007; however, have been paying COBRA payments loyally every month, am I eligible for reimbursement from my former employer? If so, do I have to contact their HR Department or will they automatically send a check for the reimbursement? I ask, because I am a single mother and the added funding would be a HUGE help, as our job market is so terrible right now. Thank you for any help!

[Chris Eddy]

Heidi,

You need to contact your former employer.

[Stephanie R.]

Hi there. I just spoke to Blue Cross and they advised that their legal team is still trying to determine whether Cal-Cobra recipients are going to benefit from this stimulus subsidy. From what I can see on your site here, we should. To your knowledge, how will it work? Will our bill from our carrier be for less? And when does this take effect? Thank you.

[Chris Eddy]

Stephanie,

Your carrier is the best resource for this information as this provision of the bill is extremely unclear.

[Lori]

Thank you Jessica and Stephanie. I've been paying Cal-Cobra Blue Cross (current premium is $858!!!), after being laid off from a law firm October 2008. When I last spoke to Blue Cross, they didn't know whether Cal-Cobra qualifies for the subsidy (it should) and said to call back early March. The (any!) subsidy would be (could literally be) a life saver. Thank you for keeping us informed and updated.

[L. Flores]

I read that these changes are retroactive to September 1, 2008, meaning you have to find your former employees and their beneficiaries and offer them this new COBRA subsidy, even if they did not elect COBRA initially. Can you clarify?

If someone had COBRA in 2008, but is no longer using COBRA, the employer must reimburse them 65% of amount paid and how do they go about receiving credit?

Thank you.

[Natalie]

How are they defining “employees involuntarily terminated by their employers”? Has a formal definition been issued? We have an employee that was terminated for their inability to return back to work from leave after exhausting their 12 weeks under FMLA. Would they qualify for the stimulus? How about employees that were fired for performance (not gross misconduct)? This is getting very confusing and will not be fun to administer.

[Susan]

We were on COBRA from Nov 08 - Feb 28 when we were told the company had closed it's doors as of Mar 1 and we were no longer eligible for COBRA - does the COBRA rebate still apply to my family?

[Chris Eddy]

Has anyone heard anything on these questions? Has anyone talked with their provider? what did the provider say?

[Marcia Cox]

My husband was laid off 12/31/08 from a company w/fewer than 20 employees & we had Blue Shield PPO, so Cal-Cobra would pertain to us though we have not opted for that coverage as yet. Is the coverage in effect as of 3/1/09 even if we may not receive notice from Blue Shield until mid April? If so, I will withdraw from a health plan for self-employed individuals (myself) in which I had enrolled effective 3/1. I need to do that by 3/10 in order to have my premium refunded.

[Chris Eddy]

Marcia,

Did you know Preferred and Executive members of the California Chamber of Commerce have unlimited access to the Labor Law Helpline?

And you can can sign up for a FREE 30-day trial now.

https://www.calbizcentral.com/Pages/FreeTrial.aspx