News

House Passes COBRA Subsidy Extension and Expansion

Update Dec. 21, 2009: President signs bill including COBRA subsidy extension

By John Hickman and Ashley Gillihan

The House voted 395-34 today to pass the COBRA subsidy extension and expansion as part of the House Amendment to the Senate Amendment to H.R. 3326 — Department of Defense Appropriations Act, 2010. The text can be found as Section 1010 starting on page 153. The measure will now return to the Senate for final approval. If enacted in its current form, the provision would:

  1. Change the end date of eligibility for the American Recovery and Reinvestment Act’s (ARRA) COBRA subsidy from December 31, 2009, to February 28, 2010.
  2. Expand the ARRA’s COBRA premium subsidy period to 15 months (from the current nine months).
  3. Allow a period for the retroactive payment of premiums for assistance-eligible individuals (i.e., individuals who were entitled to the subsidy) whose subsidy period expired on November 30 and who failed to pay their premium for December coverage. The retroactive period is 60 days, commencing with the enactment of the provision or, if later, 30 days after provision of the notice described below in bullet (4). The same refund/credit rules under the original bill apply to any assistance-eligible individual whose subsidy expired in November and who has since paid the full COBRA premium.
  4. Require a special notice to all assistance-eligible individuals who are on COBRA on or after November 1 or whose qualifying event is a termination of employment occurring on or after November 1 describing the new 15-month premium subsidy. Note: Going forward, most administrators will incorporate this additional notice in their standard COBRA package.
  5. Address an issue with regard to the original COBRA subsidy (i.e., both the qualifying event and the 18-month COBRA period must commence before the original sunset date of December 31) by conditioning eligibility for the COBRA subsidy only on a qualifying event that is the involuntary termination of employment occurring on or before the new February 28, 2010, sunset date, without regard to when the COBRA coverage period begins. Thus, for employers providing subsidized coverage that defers the COBRA start date, the 15-month period (which is applicable only to the COBRA period) may not commence until well into the future.

Later in the day, the House also passed more narrowly (217-212) a major appropriations bill with a provision that would extend the premium subsidy to those who lose their jobs through June 30, 2010. Its prospects of passing the Senate, however, are not viewed as great as for the bill that passed the House earlier in the day.

We will continue to follow these bills and keep you posted on developments as they occur.

If and when a final bill is passed, HRhero will hold an audio event for employers, plan administrators, HR managers, and others to provide guidance on your compliance obligations.

Keep up with the latest legal changes affecting employer benefits and trends in employee benefits with the Benefits Complete Compliance

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John Hickman is head of Alston + Bird’s Health Benefits Practice, where he leads five attorneys devoted exclusively to HIPAA privacy, flexible benefits, and other health and welfare benefit issues. He has been a pioneer in the consumer-directed health care arena and has worked closely with health plans, financial institutions, and employers as well as the IRS, Treasury, and DOL in developing guidance for tax-favored HRAs and HSAs.

Ashley Gillihan is counsel in the Atlanta office of law firm Alston + Bird and is a member of the firm’s Employee Benefits & Executive Compensation and ERISA Litigation Groups. He focuses his practice exclusively on health and welfare employee benefit compliance and litigation issues for employers, health plan administrators, and other health and welfare benefit plan service providers. He also has extensive experience assisting financial institutions and insurance companies that serve as HSA trustees or custodians.