FAQ - COBRA Premium Subsidies Under the American Recovery and Reinvestment Act

1. What is the impact of the American Recovery and Reinvestment Act (ARRA) on the federal Consolidated Omnibus Budget Reconciliation Act (COBRA)?
   
   President Obama signed the American Recovery and Reinvestment Act (known as the Stimulus Bill) into law on February 17, 2009. The Act includes a provision for a 65 percent employer subsidy for COBRA premiums.
   

2. Who is eligible to receive the 65 percent employer-paid COBRA subsidy?
   
   The COBRA subsidy only applies to employees and covered dependents who no longer have health plan coverage due to the qualifying event of involuntary termination or a reduction of work hours from the period September 1, 2008 through December 31, 2009. Employees who were terminated for “gross misconduct” are not eligible for the subsidy. The employee and/or dependent must meet the definition of “qualified beneficiary” under COBRA.
   

3. What is the definition of a “qualified beneficiary” under COBRA?
   
   Under the statute, a qualified beneficiary is someone who "is a beneficiary under the plan" (i.e., is covered under the plan) immediately prior to the qualifying event and who is:

   • The spouse or dependent child of a covered employee
   • A covered employee (but only if the qualifying event is a termination or reduction in work hours of the covered employee's employment)
     
     
4. When will the COBRA subsidy commence?
   
   The COBRA subsidy will commence with the first period of coverage following the enactment of the law. Since the Act was signed into law on February 17, 2009, the subsidy commenced on March 1, 2009.
   
   
5. How much will qualified COBRA beneficiaries be required to pay?
   
   Qualified COBRA beneficiaries will be required to pay 35 percent of the COBRA premium for up to nine months beginning March 1, 2009. The State Health Benefits Plan (SHBP) will adjust the COBRA billing for eligible enrollees. After nine months, the COBRA participant would be required to pay the full cost of the premium for the time that they remain on COBRA.
   
   
6. Are there any earning limitations for the COBRA subsidy?
   
   The Act has an earnings limitation provision. A qualified COBRA beneficiary is not entitled to the COBRA subsidy during either 2008 or 2009 when either as a taxpayer or a dependent of a taxpayer he or she had a federal modified adjusted gross income that exceeds $145,000 (or $290,000 filing a joint return).
   There is also a reduction in the subsidy if the taxpayer or a dependent of a taxpayer had a federal modified adjusted gross income that exceeds $125,000 (or $250,000 filing a joint return).
   
   
7. What should a qualified COBRA beneficiary do if he or she reaches or exceeds the earnings limitation?
   
   Eligible COBRA participants who meet or exceed the earnings limitations can make a one-time election to waive the COBRA subsidy.
   
   
8. What happens if a COBRA participant becomes eligible for another group health plan or Medicare?
   
   The COBRA subsidy ends if the COBRA participant becomes eligible for another group health plan or Medicare. The Act states that it is the COBRA participant’s responsibility to notify the COBRA administrator when he or she is eligible for other health coverage.
   
   
9. When will qualified COBRA beneficiaries be notified of their eligibility for the COBRA subsidy?
   
   The act states that all qualified COBRA beneficiaries must be notified no later than April 18, 2009. The State Health Benefits Plan (SHBP) will send COBRA notifications directly to eligible COBRA participants prior to the deadline.
   
   
10. Will the State Health Benefits Plan also notify qualified COBRA beneficiaries who elected or were eligible for COBRA prior to the law?
    
    Qualified COBRA beneficiaries who experienced a COBRA qualifying event after September 1, 2008, but before the enactment (February 17, 2009) and would have been eligible for the employer COBRA subsidy will be offered another “second chance” COBRA election period. The election period will be offered to all eligible COBRA beneficiaries even if they originally rejected COBRA coverage. The election period will also be offered to COBRA participants who elected COBRA coverage and terminated coverage during the time period.
    
    
11. Does the American Recovery and Reinvestment Act extend the period of COBRA?
    
    No. The American Recovery and Reinvestment Act does not extend the period of COBRA coverage to which the qualified COBRA beneficiary is entitled.
    
    
12. Where can I obtain more information?
    
    Contact a UHR Benefits Specialist at 732-932-3020, ext. 4077 or via email.

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Last Updated: 03/20/2009