Recovery Act Reduces Cobra Premiums
Posted Jul.28, 2009 in CalCobra, Cobra, Employers, News, Other Coverage
The American Recovery and Reinvestment Act of 2009 (ARRA), signed into law in February, offers significant health insurance benefits to all those who are involuntarily terminated from a job between September 1, 2008 and December 31, 2009.
If you lose or have lost work during this period, you need to know about these provisions because they can save you money. Keep in mind, however, that if you voluntarily quit your job you don’t qualify. Moreover, individuals who were fired for negligence or misconduct don’t qualify either.
If you are an employer and let employees go during these 15 months, new rules under this law require action on your part. Among its many features, ARRA provides federal subsides that reduce premiums for nine months of COBRA or Cal-COBRA coverage.
During this nine-month period eligible individuals (and their qualified beneficiaries) are responsible for only 35 percent of their premiums. For COBRA recipients the remaining 65 percent must be paid by their former employer, while for Cal-COBRA recipients, the 65 percent portion must be paid by the insurer. Employer and insurer payments, however, are fully reimbursable through a tax credit.
Another provision of the new law allows COBRA recipients to switch their health coverage to a less expensive policy if that policy is available to all active employees of their former company.
Under the previous law, an eligible employee could only elect to continue coverage under the policy they had at the time they were terminated. To comply with ARRA, employers must amend their existing COBRA notice forms and distribute additional notices that include information about these benefits.
CalCPA member firms with ProtectPlus coverage should take note that Seabury & Smith has already sent letters to all those they believe are eligible under Cal-COBRA. Employers with 20 or more employees who fall under COBRA regulations are themselves responsible for notifying former employees who may be eligible.
If you have questions or concerns regarding these issues, please contact Seabury & Smith customer service at (800) 824-1154. Those with other health insurance coverage should make sure they are in compliance.
