Tulsa World: Don't get bitten by COBRA deadline

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Don't get bitten by COBRA deadline
Stimulus bill includes extension of coverage

St. John Medical Center is seen with the Tulsa skyline in the background in 2007. The American Recovery and Reinvestment Act of 2009 provides a subsidy reducing the cost of COBRA health insurance by 65 percent to the employee and other state group continuation coverage for laid-off workers. TOM GILBERT / Tulsa World / Helicopter provided by Bill Stokely

By PHIL MULKINS World Staff Writer
Published: 4/8/2009 2:20 AM
Last Modified: 6/12/2009 2:07 PM

Laid-off workers are getting a break on their health insurance through the federal government's economic stimulus package.

Since its inception in 1986, COBRA health insurance has given people the ability to have their employer's group health insurance continued after they lose their jobs. But the cost has been high — 31 percent of the average monthly unemployment benefit and 83 percent of a family's benefit typically is required to pay the premium for coverage under COBRA, an abbreviation for the Consolidated Omnibus Budget Reconciliation Act.

The American Recovery and Reinvestment Act of 2009, signed Feb. 17 by President Barack Obama, provides a subsidy reducing COBRA's cost 65 percent to the employee and other state group continuation coverage for laid-off workers.

COBRA requires employers with 20 or more employees to provide continued group health insurance coverage. Oklahoma law requires employers of any size to provide group continuation coverage, says an Oklahoma Insurance Department fact sheet at tulsaworld.com/OKcobra.

Workers who qualify for the benefit under the stimulus

plan — the COBRA Health Insurance Continuation Premium Subsidy — are those who have "involuntarily lost their jobs" between Sept. 1, 2008, and Dec. 31, 2009. They must have been laid off, not quitting voluntarily or being "fired for cause."

These workers qualify for a 65 percent subsidy of COBRA continuation premiums for themselves and their families for up to nine months. Qualifying workers must pay 35 percent of the premium to their former employers.

A second chance for COBRA coverage also is included in the stimulus. Those qualifying workers who became unemployed Sept. 1, 2008, through Feb. 16, 2009, who did not elect COBRA when it was first offered or who did elect COBRA but are no longer enrolled (due to its expense) have been given a new election opportunity. Those eligible for the extended COBRA election period must receive a notice from their former employers informing them of this by April 18.

They have 60 days after receiving the notice to elect COBRA. This election period does not extend the period of COBRA continuation coverage beyond the original maximum, which is 18 months from their layoff date.

Coverage taken during this election period begins with the first period of coverage beginning on or after Feb. 17, 2009.

The stimulus law, including the subsidy, applies to federal COBRA and state group continuation coverage. However, Oklahoma does not have a comparable state continuation right, meaning there is no subsidy available for workers whose last employer had less than 20 employees. State Insurance Commissioner Kim Holland is working with the Legislature to establish a comparable state continuation right this legislative session, said Holland spokesman Marc D. Young.

Former employees typically qualify for up to 18 months of COBRA coverage, but the subsidy lasts only nine months, meaning eligible individuals who choose to pay for 18 months of COBRA coverage after March 1, 2009, would still have to pay for nine months of unsubsidized premiums.

See the Centers for Medicare and Medicaid Services fact sheet at tulsaworld.com/CMMScobra. Also see "IRS Information to Help Employers Claim COBRA Medical Coverage Credit on Payroll Tax Form" at tulsaworld.com/IRScobraEmpr.

Employers share costs of insurance

The new CORBA subsidy provided by the economic stimulus law applies to group health plans that are subject to the federal COBRA continuation coverage requirements or to similar requirements under state law.

If you are an employer with such a plan and you receive a 35 percent payment from a qualifying worker, you are required to make the remaining 65 percent payment, says the Internal Revenue Service Q&A on the subject, found at tulsaworld.com/IRScobraQ&A.

Subsidy requirements apply even if the employer's group health plan is self-insured. The subsidy requirements apply to all plans subject to the COBRA requirements, including self-insured plans.

In such cases, the employer must provide the COBRA coverage if the assistance-eligible individual pays 35 percent of the required premium. The remaining 65 percent is treated as a payment of payroll taxes by the employer maintaining the plan.

COBRA coverage is based on the same coverage that the individual had at the time of the qualifying event. However, under the new COBRA subsidy provision, an employer may offer an assistance-eligible individual the option of choosing other coverage that is also offered to active employees and that does not have higher premiums than the coverage the individual had at the time of the qualifying event.

Employers are required to send forms to former employees so they can elect to continue their group coverage and receive the subsidy. Former employees have 60 days after receiving the forms to enroll.

Information about the COBRA subsidy is available through the U.S. Department of Labor at (866) 444-3272 or online at tulsaworld.com/USDOLcobra. The web site contains model notices and other guidance on these provisions. The Department of Health and Human Services (at tulsaworld.com/DHHScobra) also has information. These agencies share responsibility with the IRS for the COBRA requirements.

Employers with questions on administering the COBRA continuation premium subsidy to former employees should see the IRS roundup at tulsaworld.com/IRS204708. Employers should use the updated "Form 941, Employer's Quarterly Federal Tax Return," at tulsaworld.com/IRSF941 to report their COBRA premium assistance payments.

Consumer Page topics: Tulsa World consumer writer Phil Mulkins wants to know which topics interest you most. Call 699-8888 or e-mail your interest to phil.mulkins@TulsaWorld.com or mail it to Tulsa World Consumer, PO Box 1770, Tulsa OK 74102-1770.

By PHIL MULKINS World Staff Writer

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