Cobra Extensions and Law Importance
The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a law passed by the U.S. Congress and signed by President Reagan that, among other things, mandates that a health insurance program giving some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA). The law deals with a great variety of subjects, such as tobacco price supports, railroads, private pension plans, disability insurance, and the postal service , but it is perhaps best known for Title X, which amends the Internal Revenue Code and the Public Health Service Act to deny income tax deductions to employers for contributions to a group health plan unless such plan meets certain continuing coverage requirements. The violation for failing to meet those criteria was subsequently changed to an excise tax.
Although this statute became law on April 7, 1986, its official name is the Consolidated Omnibus Budget Reconciliation Act of 1985. Because of the discrepancy between the official name of the Act and the year in which it was enacted, some government publications refer to the Act as the Consolidated Omnibus Budget Reconciliation Act of 1986. The Act is often referred to simply as “COBRA”.
COBRA itself can be a dangerous form of health insurance because it ends. If you are on COBRA it is important to investigate different options if you can whether it be an individual health insurance plan (hopefully from us) or getting a new job. Many times after COBRA ends the insured is forced to go onto a conversion policy, which is a very expensive individual health insurance plan that can be up 2 or 3 times more than COBRA itself. The only people who take these plans are those that can’t get individual health insurance or can’t form a group. If you are a business owner you can instead elect a One Man Group.
American Recovery and Reinvestment Act
Below you will find a synopsis of the American Recovery and Reinvestment Act (ARRA)- a program in which amongst other things, provides much needed assistance to those who have recently lost their employer sponsored health insurance coverage by subsidizing 65% of their COBRA insurance premiums for 9 months of the 18 months that COBRA is normally available to those eligible. You can view further details by reviewing the following FACT Sheet issued by the Department of Labor COBRA Premium Reduction Fact Sheet DOL
In a nutshell, an individual who is terminated from their employment and is eligible for COBRA is subsequently eligible for premium assistance for themselves and their family. And to put it even clearer, here’s a breakdown of those who are probably eligible for Cobra premium assistance.
Changes Regarding COBRA Continuation Coverage Under ARRA
Premium Reduction: The premium reduction for COBRA continuation coverage is available to “assistance eligible individuals”.
An “assistance eligible individual” is the employee or a member of his/her family who:
- is eligible for COBRA continuation coverage at any time between September 1, 2008 and December 31, 2009;
- elects COBRA coverage; and
- is eligible for COBRA as a result of the employee’s involuntary termination between September 1, 2008 and December 31, 2009
This bill will be effective from September 1, 2008 through December 31, 2009 and the employee has 90 days to elect this assistance by notifying the group health plan in writing...so all we need now is to let people know what COBRA is, let them know if they are eligible, let them know that this assistance program is available and that they have 90 days to elect it - what's that, 'you were laid off 4 months ago'..oh no, that's awful, but true. I'm sure if I kept reading through those 400 pages I would've found something on retroactive coverage. But you see my point, ok..assuming this is brand new, ok great, you were just laid off - you have 90 days to notify the group health plan in writing that you want to elect this assistance. Fast forward, 4 months later they thought it magically happened or they procrastinated for too long or they didn't feel like writing a letter or couldn't find the address where they were supposed to mail it to...
For those who have lapsed in coverage and are looking for cost effective coverage compare quotes and apply online for an individual or family health insurance plan today..
View the entire bill for this act, by accesing the American Recovery and Reinvestment Act
Here’s an excerpt from the 407 page document that I thought was particularly pertinent for our purposes.
TITLE III—PREMIUM ASSISTANCE FOR COBRA BENEFITS
SEC. 3001. PREMIUM ASSISTANCE FOR COBRA BENEFITS.
(a) PREMIUM ASSISTANCE FOR COBRA CONTINUATION COVERAGE
FOR INDIVIDUALS AND THEIR FAMILIES.—
(1) PROVISION OF PREMIUM ASSISTANCE.—
(A) REDUCTION OF PREMIUMS PAYABLE.—In the case
of any premium for a period of coverage beginning on
or after the date of the enactment of this Act for COBRA
continuation coverage with respect to any assistance
eligible individual, such individual shall be treated for purposes
of any COBRA continuation provision as having paid
the amount of such premium if such individual pays (or
a person other than such individual’s employer pays on
behalf of such individual) 35 percent of the amount of
such premium (as determined without regard to this subsection).
(B) PLAN ENROLLMENT OPTION.—
(i) IN GENERAL.—Notwithstanding the COBRA
continuation provisions, an assistance eligible individual
may, not later than 90 days after the date
of notice of the plan enrollment option
(2) LIMITATION OF PERIOD OF PREMIUM ASSISTANCE.—
(A) IN GENERAL.—Paragraph (1)(A) shall not apply with
respect to any assistance eligible individual for months
of coverage beginning on or after the earlier of—
(i) the first date that such individual is eligible
for coverage under any other group health plan
(ii) the earliest of—(I) the date which is 9 months after the first
day of the first month that paragraph (1)(A)
applies with respect to such individual,
(II) the date following the expiration of the
maximum period of continuation coverage required
under the applicable COBRA continuation coverage
provision, or
(III) the date following the expiration of the
period of continuation coverage allowed under
paragraph (4)(B)(ii)
(C) NOTIFICATION REQUIREMENT.—An assistance
eligible individual shall notify in writing the group health
plan with respect to which paragraph (1)(A) applies if such
paragraph ceases to apply by reason of subparagraph (A)(i).
Such notice shall be provided to the group health plan
in such time and manner as may be specified by the Secretary
of Labor.
(3) ASSISTANCE ELIGIBLE INDIVIDUAL.—For purposes of this
section, the term ‘‘assistance eligible individual’’ means any
qualified beneficiary if—
(A) at any time during the period that begins with
September 1, 2008, and ends with December 31, 2009,
such qualified beneficiary is eligible for COBRA continuation
coverage,
(B) such qualified beneficiary elects such coverage, and
(C) the qualifying event with respect to the COBRA
continuation coverage consists of the involuntary termination
of the covered employee’s employment and occurred
during such period.
(b) ELIMINATION OF PREMIUM SUBSIDY FOR HIGH-INCOME
INDIVIDUALS.—
(1) RECAPTURE OF SUBSIDY FOR HIGH-INCOME INDIVIDUALS.—
If—
(A) premium assistance is provided under this section
with respect to any COBRA continuation coverage which
covers the taxpayer, the taxpayer’s spouse, or any
dependent (within the meaning of section 152 of the
Internal Revenue Code of 1986, determined without regard
to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of the
taxpayer during any portion of the taxable year, and
(B) the taxpayer’s modified adjusted gross income for
such taxable year exceeds $125,000 ($250,000 in the case
of a joint return),then the tax imposed by chapter 1 of such Code with respect
to the taxpayer for such taxable year shall be increased by
the amount of such assistance
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