On March 2, 2010, the COBRA subsidy provisions originally
enacted under the American Recovery and Reinvestment Act, as
extended in December, were once again extended by the Temporary
Extension Act of 2010 (TEA). (Our December 2009 Client Alert
provides a more detailed discussion of the December extension and
expansion of the COBRA subsidy.) TEA requires immediate attention
by employers and those assisting employers in administering group
health plans.
TEA extends and modifies the application of the COBRA subsidy in
four important respects. First, it extends the availability of the
subsidy to employees (and their families) losing group health
coverage due to an employee's involuntary termination of
employment occurring on or before March 31, 2010. Under the
December extension, this period expired Feb. 28, 2010.
Second – and significantly – TEA expands
eligibility for both the COBRA continuation coverage and subsidy to
include individuals who (a) had a reduction of hours after Sept. 1,
2008 but did not elect COBRA coverage (or discontinued such an
election) and (b) were later involuntarily terminated on or after
March 2, 2010 (but not later than March 31, 2010). The involuntary
termination for those individuals will be treated as a qualifying
event entitling the individual to the COBRA subsidy after that
involuntary termination, but the period during the reduction of
hours will be counted for purposes of determining the duration of
continuation coverage. Employers (or other group health plan
administrators) are required to notify affected individuals of this
new provision.
Third, TEA clarifies that a termination will be treated as
involuntary if it is based on an employer's reasonable
determination for which the employer maintains supporting
documentation (including an attestation).
Finally, although not expected to affect most employers or health
insurance issuers, the legislation authorizes civil actions to
enforce government determinations regarding an individual's
eligibility for the COBRA subsidy. If a plan fails to comply with a
determination made by the applicable governmental agency that an
individual is entitled to the COBRA subsidy, the appropriate agency
may also assess a penalty of up to $110.00 per day.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
