Stimulus COBRA Subsidy: New Notices Every Employer Must Use

The new stimulus package, called the American Recovery and Reinvestment Act of 2009 (ARRA), provides COBRA subsidies for certain employees terminated or laid off between September 1, 2008 and December 31, 2009. The subsidy reduces an employee’s COBRA premium by 65% for up to nine months, provided that the employee meets the eligibility requirements.

Last week, the U.S. Department of Labor (DOL) issued new model COBRA notices that employers must send to all employees who have separated from employment since September 1, 2008, and to employees who separate from employment in the future. You can download the DOL model forms here.

CEA Online subscribers can download forms we’ve tailored specifically for California employers here—which you can fill out right on your computer.

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The notices refer to individuals, not just employees. This is because an individual, such as a family member, may be currently paying or eligible for COBRA coverage, even if that person was never an employee. For example, a divorced or separated spouse of an employee may be eligible for assistance, but is no longer living with the employee. Employers should send the appropriate notice to each individual who is or may be eligible for assistance.

There are four separate model notices:

General Notice: Full Version

Plans subject to the Federal COBRA provisions must send the General Notice (full version) to all beneficiaries, not just covered employees, who experienced a “qualifying event” at any time from September 1, 2008 through December 31, 2009, and who have not yet elected COBRA coverage.

A “qualifying event” is a loss of health coverage due to a termination or layoff, but may also include other types of separation from employment. To be safe, employers should send the notice to any employee who has left or will leave since September 1, 2008.

This full version includes information on the premium reduction as well as information required in a standard COBRA election notice.

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General Notice: Abbreviated Version

The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information.

The abbreviated version may be sent to individuals who have left since September 1, 2008, AND who have already elected COBRA coverage, and still have it.

Alternative Notice

Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. The model notice we’ve provided for CEA Online Subscribers has been tailored for Cal-COBRA, and should be used by California employers with 2 to 19 employees. Download the Model Alternative Notice.

Notice Used in Connection with Extended Election Periods

Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any individual eligible for assistance (or any individual who would be an eligible individual if a COBRA continuation election were in effect) who:

  1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
  2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

This notice includes information on ARRA’s additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

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