Q. What is the COBRA subsidy provided in the stimulus package (ARRA)?
The subsidy reduces the premium for COBRA or State Health Insurance Continuation. Individuals who are eligible to receive the subsidy because of an involuntary termination pay 35% of the COBRA or Continuation premium for up to nine months or until December 31, 2009. The employer may recover 65% of this premium by taking a credit on its quarterly employment tax return. If an employee was offered COBRA as a result of an involuntary termination of employment dating back to September 1, 2008 through February 16, 2009 and declined, he/she may have another opportunity to elect COBRA and pay a reduced premium.
Q. What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows certain employees to continue employer-provided group health coverage if they would otherwise lose the coverage due to a qualifying event such as divorce or loss of a job. Any employer with 20 or more employees is required to offer COBRA. The employee pays the full premium and may be charged a small administration fee. If the employer discontinues group health insurance, COBRA is not available.
Q. What is State Health Insurance Continuation?
The State of Colorado requires employers with less than 20 employees to offer Continuation to any employee insured for a minimum of six months under the employer’s group health plan. The other provisions of COBRA would apply.
Q. What plans are subject to the premium subsidy provisions?
Group health insurance plans, dental, and vision plans are subject to COBRA and Continuation subsidy premiums. Supplemental benefits such as chiropractic and acupuncture may be included.
Q. Who is eligible to receive the subsidy?
All Assistance Eligible Individuals (AEI) who meet the following requirements:
- Are eligible for COBRA or State Continuation coverage
- Elect COBRA or State Continuation.
- The employee was involuntarily terminated between September 1, 2008 and December 31, 2009.
- The employee is not eligible for other group health coverage (spouse plan or new employer plan) or Medicare.
- Employee earns less than $125,000 per year.
Q. Do domestic spouses or same-sex spouses qualify for this subsidy?
No. Domestic partners cannot be AEIs because they are not federal COBRA-qualified beneficiaries. Same-sex spouses cannot be AEIs because of the federal Defense of Marriage Act.
Q. May employees currently enrolled in COBRA switch to another coverage option?
The employee is allowed to switch to a different plan if:
- The premium for the different plan is the same or lower than the coverage the individual had in place at the time of the qualifying event.
- The different coverage is also offered to active employees
- The different coverage is not limited to only dental, vision, counseling, flexible spending account or an on-site medical clinic.
Q. How is the employer reimbursed for 65% of the premium?
The employer may recover the subsidy by taking the amount as a credit on its IRS Form 941 quarterly employment tax return.
Q. Where can I get more information?
Please visit www.dol.gov/egsa/COBRA or for information specific to Colorado, The American Recovery and Reinvestment Act of 2009 (ARRA).pdf
At Nonprofit Resources, our insurance programs offer a wide range of competitively priced packages. Remember, profits earned by Nonprofit Resources are used to support Colorado Nonprofit Association programs. Please contact us when you are purchasing insurance for your organization. You can reach us via phone at 303-894-0298 or toll-free at 866-537-1142.
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Newsletter Articles 2010 