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DISB Releases Alert on New COBRA Benefits in the Economic Stimulus Plan

Monday, March 9, 2009

DISB Releases Alert on New COBRA Benefits in the Economic Stimulus Plan

A significant provision included in the stimulus law established a new federal subsidy of up to 65 percent the cost of COBRA benefits for up to nine months.

(Washington, DC) — The DC Department of Insurance, Securities and Banking (DISB) today released an information alert on new provisions in the recently enacted stimulus law, which amends COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA provides certain former employees the right to continue their health insurance coverage at group rates on a temporary basis. A significant provision included in the stimulus law established a new federal subsidy of up to 65 percent the cost of COBRA benefits for up to nine months for eligible employees who involuntarily lose their jobs between September 1, 2008, and December 31, 2009. 

“The provisions are effective upon enactment and require prompt attention,” said DISB Commissioner Thomas E. Hampton, adding that the American Recovery and Reinvestment Act of 2009 was signed into law February 17, 2009. “Employers and administrators should start reviewing the records of terminations from September 1, 2008, to date, and prepare to provide notice of the new requirements as soon as a model notice is available from the federal government.”

An eligible employee is one who has been involuntarily terminated between September 1, 2008, and December 31, 2009, and elects COBRA coverage. Residents should note that eligible employees who initially declined COBRA coverage must be given an additional 60 days to elect COBRA coverage and receive the subsidy, and they may opt for lower cost plans. Employers or health plans that administer COBRA benefits will receive a credit against payroll taxes for the cost of the subsidy. The amount of the subsidy is reduced or eliminated for persons earning more than $125,000 if single, or $250,000 if filing jointly. The new COBRA provisions are effective for premiums due on or after February 17, 2009.

In the announcement, DISB answers key questions such as does the law extend the length of time for the group continuation coverage; where should eligible individuals sign up; and what to do if an employer refuses to provide group continuation coverage. District residents may visit the Web site to read the full announcement. 

Commissioner Hampton would like residents to take away the following key points regarding the premium subsidies for COBRA continuation coverage for unemployed workers:

  • The law provides a subsidy up to 65 percent of COBRA continuation premiums for up to nine months for certain workers who have been involuntarily terminated, and for their families.
  • This subsidy also applies to health care continuation coverage if required by “comparable” state “mini-COBRA” laws.
  • Eligible individuals entitled to a full subsidy pay 35 percent of the premium. The receiver of the premiums (health insurer or employer) then deducts the other 65 percent from its payroll liability.
  • To qualify for premium assistance, a worker must be involuntarily terminated between September 1, 2008, and December 31, 2009.
  • The subsidy would terminate upon offer of any new employer sponsored health care coverage or Medicare eligibility.
  • Workers who were involuntarily terminated between September 1, 2008, and enactment— but failed to initially elect COBRA because it was unaffordable— are provided with an additional 60 days to elect COBRA and receive the subsidy.
  • Participants must attest that their same-year income will not exceed $125,000 for individuals and $250,000 for families.
  • Employees have the option of electing lower cost health care plans under the employer’s plan so long as the premium does not exceed the premium the individual paid while employed, and the same coverage is offered to other employees.

The Council of the District of Columbia amended the District of Columbia Continuation of Health Coverage Act of 2002, and employees of small business may be eligible for the same subsidy now available under COBRA. Any resident needing more information on COBRA, please contact DISB at (202) 727-8000.