As you have probably heard by now, on February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (routinely referred to as the “stimulus bill” or “ARRA”). Since ARRA was enacted, the Department of Labor, the Internal Revenue Service, and the State of Oregon have been busy filling in the gaps regarding the COBRA premium subsidy programs. Here are some highlights:
1. What is an involuntary termination?
An involuntary termination occurs when employment is severed by the employer and the termination was not due to the employee’s implicit or explicit request. An involuntary termination also occurs if there was a temporary layoff with recall rights and during the layoff, the employee’s hours were reduced to zero and the employee suffered a loss of health coverage. However, if an employee’s hours are reduced but are still greater than zero, the mere reduction in hours does not create an involuntary termination, even if the employee loses health coverage because of the reduction in hours.
2. Is the entire COBRA premium subject to the subsidy?
That depends. Some employers provide continuation coverage to persons not entitled to it under COBRA. For example, pursuant to COBRA, only the employee, spouse and dependent children are entitled to COBRA continuation coverage. However, many employers also offer continuation coverage to same-sex domestic partners and others who live in the employee’s household. In that case, the COBRA premium subsidy only applies to the premiums for coverage for the employee, spouse and dependent children. For example, assume the premium to continue coverage for a former employee, her dependent child and her same-sex domestic partner totals $1,000 per month. Only that portion of the $1,000 premium attributed to the employee and the employee’s dependent child is eligible to the COBRA premium subsidy. The balance of the premium (that attributed to the same-sex domestic partner) will need to be paid entirely by the former employee.
3. If an assistance eligible individual is eligible for other group health plan coverage but does not enroll in the other plan, can the individual still receive the COBRA premium subsidy?
No. For traditional COBRA purposes, once the person is eligible for and enrolls in another group health plan coverage, he/she is no longer eligible for COBRA continuation coverage. However, for purposes of the COBRA premium subsidy, once the individual is merely eligible to enroll in another group health plan, the person is disqualified from receiving the subsidy.
