The following information is from the United States Department of Labor’s web site. Since this COBRA article (or booklet, as the article refers to it) from dol.gov has an abundance of information, we will break the article up into sections over the next few weeks. We hope that you find the information valuable.

An Employee’s Guide to Health Benefits Under COBRA – The Consolidated Omnibus Budget Reconciliation Act

Note: This publication contains information about the COBRA premium reduction provisions of the American Recovery and Reinvestment Act of 2009 (ARRA). This publication has not been updated for recent amendments made to ARRA. For updated information on ARRA and its amendments, please see the COBRA Premium Reduction Fact Sheet.

Premium Reduction Following Involuntary Termination

If you involuntarily lost your job at any time from September 1, 2008 through February 28, 2010, you and/or each member of your family may be eligible for a COBRA premium reduction under the American Recovery and Reinvestment Act of 2009 (ARRA), as amended by the Department of Defense Appropriations Act, 2010 (2010 DOD Act). For individuals who are eligible, it is a 65 percent reduction in COBRA premiums for periods of coverage beginning on or after February 17, 2009. The premium reduction for an individual ends after 15 months of the reduction, upon eligibility for other group coverage (or Medicare), or when the maximum period for COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare.

You and/or each member of your family are eligible for the premium reduction if:

  • You have a qualifying event for continuation coverage under COBRA or a State law that provides comparable continuation coverage (for example, so-called “mini-COBRA” laws) that is the employee’s involuntary termination at any point from September 1, 2008 through February 28, 2010; and
  • You elect the COBRA coverage timely.

You are not eligible for the premium reduction if you are eligible for other group health coverage (such as a spouse’s plan) or Medicare.

Your plan administrator should provide a notice about the premium reduction and the 2010 DOD Act extension either separately or along with the required COBRA notice.

The 2010 DOD Act also extended the maximum period for receiving the premium reduction by six months (from nine to 15 months). If you reached the end of the original premium reduction period, you are eligible to receive the premium reduction for an additional six months provided you otherwise remain eligible for the premium reduction program.

In addition, if you reached the end of the original premium reduction period, you are in a “transition period” and have additional time to pay extension-related reduced premiums. A transition period is the period that begins immediately after the end of the maximum number of months (generally nine) of premium reduction available under ARRA prior to its amendment. You are in a transition period only if the premium reduction provisions would continue to apply due to the extension from nine to 15 months and you otherwise remain eligible for the premium reduction. You must be provided a notice of the extension within 60 days of the first day of the transition period. Your transition period may include multiple periods of coverage. The retroactive payment(s) for the period(s) of coverage must be made by the later of February 17, 2010, 30 days from when the notice was provided, or the end of the otherwise applicable payment grace period.

Although the employee’s involuntary termination, the qualifying event for continuation coverage under COBRA, must occur by February 28, 2010 to be eligible for the premium reduction, the premium reduction assistance does not end on that date. If you become eligible for the premium reduction by February 28, 2010, you are entitled to receive 15 months of premium assistance as long as you remain eligible. For example, if you started COBRA on November 1, 2009, you would be entitled to premium assistance from November 1, 2009 through January 31, 2011 as long as you remain eligible.

If an employer offers additional coverage options to active employees, the employer may, but is not required to, allow those eligible for the premium reduction to switch coverage from what they had at the time of the qualifying event. However, to retain eligibility for the premium reduction, the different coverage must have the same or lower premium as the original coverage and it can not be limited to only dental, vision, or counseling coverage, a flexible spending account, or an onsite medical clinic. If the plan allows you to change coverage options, it must provide a notice of this opportunity. You will have 90 days after the notice is provided to change your coverage.

The amount of the premium reduction is recaptured for certain high income individuals. If the amount you earn for the year is more than $125,000 (or $250,000 for married couples filing a joint federal income tax return) all or part of the premium reduction may be recaptured by an increase in your income tax liability for the year. If you think that your income may exceed the amounts above, you may wish to consider waiving your right to the premium reduction. For more information, consult your tax preparer or visit the IRS Web page on ARRA.

If your employer, plan or insurer denies you the premium reduction, you may request an expedited review from the Department of Labor. A determination regarding your appeal must be made within 15 business days after receiving your completed application. Visit the COBRA Web page for the application to request the Department’s review as well as additional information on the COBRA premium reduction. You can file the application online or submit it by fax or mail.

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