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The American Recovery and Reinvestment Act (ARRA) is Now Law and Contains Important Changes to COBRA

COBRA requires group health plans with more than 20 eligible subscribers to offer individuals to continue group coverage if a specific qualifying event (such as job loss) would result in termination of coverage. The bill signed into law on February 17, 2009, and effective March 1, 2009 makes numerous changes to the current COBRA rules, many of them retroactive:

  • Allows individuals terminated after 9/1/08 who did not elect COBRA during their initial eligibility (or elected it and subsequently dropped it) a “second chance” to enroll with another 60 day window to enroll. These members pay only 35% of COBRA premium for 9 months (March 1, 2009 – November 30, 2009).
  • If the individual selects COBRA during this “second chance”, their 9 month eligibility will still be counted based on their initial eligibility date even though they did not elect coverage then.
  • Provides for a subsidy of up to 65% of the COBRA premium for individuals who were involuntarily terminated between 9/1/08 and 12/31/09. Employers claim the balance of their premium as a payroll tax credit.
  • The subsidy is available from 3/01/09 (the day the law was enacted) forward.

The subsidy has an income restriction and begins to phase out for individuals earning over $125K ($250K for families)

  • The subsidy also applies to those not subject to Federal COBRA, but where certain State Continuation Coverage laws apply (such as with fewer than 20 employees, insured church plans or government plans.)


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