6 FAQs about end of COBRA subsidy

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Federal subsidies covering 65 percent of the cost of COBRA premiums will expire after Wednesday.

The subsidies, enacted under the American Recovery and Reinvestment Act (ARRA), were given to eligible unemployed workers laid off between September 2008 and May 2010. [DOL has offered a full fact sheet on the COBRA Premium Reduction]

Though Congress had passed several extensions for the premium assistance program, legislation to extend eligibility to workers laid off beyond May 31, 2010 was proposed, but never passed.

[See also: Goodbye, COBRA subsidy]

Those who elect COBRA continuation coverage typically are offered coverage for 18 months. Since the subsidies covered 15 months of premiums, those who were laid off in May 2010 (the last segment of unemployed eligible for premium assistance) and who still have COBRA face at least three months paying the full cost of coverage beginning in September. According to the Kaiser Family Foundation, COBRA coverage without a subsidy is almost three times the cost at $1,137 for a family policy and $410 for an individual, versus $398 and $144 respectively.

[See also: 5 tips for life after COBRA]

In light of the subsidies coming to an end, The Department of Labor updated Tuesday its COBRA ARRA Web page with six FAQs:

Q1: I’ve heard that the COBRA Premium Reduction (Subsidy) ends on August 31, 2011, is this true?

Not necessarily, some individuals will still be eligible to receive the subsidy beyond August 31, 2011. The American Recovery and Reinvestment Act (ARRA) provided a COBRA premium reduction for eligible individuals who were involuntarily terminated from employment through the end of May 2010. Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare even if their COBRA coverage did not start until a later date due to the terms of a severance arrangement, or the use of banked hours or other similar provision that delayed the start of their COBRA coverage.  For example if an individual was involuntarily terminated on  May 31, 2010 and due to the terms of a severance agreement their COBRA coverage did not start until December 1, 2010, they would still be eligible for the full 15 months of subsidy through February 29, 2012 as long as they are not eligible for another group health plan or Medicare.

Q2: Is the COBRA Premium Reduction (Subsidy) still available to individuals who have lost their jobs?

The American Recovery and Reinvestment Act (ARRA) provided a COBRA premium reduction for eligible individuals who were involuntarily terminated from employment through the end of May 2010. Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.

Individuals who believe they have been incorrectly denied the subsidy may request the Employee Benefits Security Administration to review their denial and issue a determination within 15 business days. The application to request a review is available on this Web site.

Q3: What can I do if I believe I am eligible for the premium reduction but my plan sponsor has denied my request for treatment as an "assistance eligible individual"?

If the plan determines that you are not eligible for the premium reduction, you can request an expedited review of the denial. The Department of Labor will handle requests related to private sector employer plans subject to ERISA's COBRA provisions. Applicants may either be the former employee or a member of the former employee's family who is eligible for COBRA

continuation coverage or the COBRA premium assistance through an employment-based health plan. The Department of Health and Human Services will handle requests for Federal, State, and local governmental employees including public schools, public colleges and universities, or a police or fire department, as well as requests related to group health insurance coverage provided pursuant to state continuation coverage laws. The Departments are required to make a determination regarding your request within 15 business days after receiving your completed application for review. The Secretary of Labor may assess a penalty against a plan sponsor (and similarly, the Secretary of HHS against a health insurance issuer) of not more than $110 per day for a failure to comply with a determination within 10 days after the date of the receipt of the determination.

Note: Appeals to the Department of Labor must be submitted on the U.S. Department of Labor application form. The form is available at www.dol.gov/COBRA/main.html and can be completed online or submitted by mail or fax as indicated in the instructions. If you believe you have been inappropriately denied eligibility for the premium reduction, you may wish to speak with an Employee Benefits Security Administration Benefits Advisor at 1.866.444.3272 before filing this form. Appeals to the Department of Health and Human Services must be submitted on the Centers for Medicare & Medicaid Services application form. The form is available at www.continuationcoverage.net and can be submitted by mail or fax as indicated in the instructions. For more information about the review of denials, individuals can also contact Maximus, a CMS-sponsored contractor, at 1.866.400.6689.

Q4: I have been on COBRA with the 65% premium subsidy for almost 15 months, what should I do?

Those individuals who qualified for the premium reduction were only required to pay 35 percent of the COBRA premium otherwise due to the plan. This premium reduction is available for up to 15 months. If your COBRA continuation coverage lasts for more than 15 months, you will need to pay the full amount to continue your COBRA continuation coverage. If you are unsure when your 15 months of premium assistance ends or how much the new premium is, contact your plan right away so that you can make sure you pay the correct amount for the correct time period. If you do not make the full payment within the correct time period, your COBRA coverage can be canceled.

Q5: What if I can not afford to pay the full premium for the remaining 3 months?

It is very important to pay the remaining 3 months if at all possible, as you lose some health coverage rights or options if your COBRA is terminated for non-payment. Individuals who exhaust their COBRA are eligible to obtain coverage through state high risk pools and also qualify for special enrollment in a spouse's plan. These rights are lost if an individual's COBRA is terminated for non-payment. (Note: If a person becomes eligible for coverage in a new employer's plan or spouse's plan, they lose eligibility for the subsidy and are required to notify their COBRA provider of their eligibility for the other coverage.)

If you have limited income and resources (assets), you may want to contact your state to determine if you are eligible for Medicaid or other programs that may assist you in obtaining assistance with health coverage.

Q6: If I did not make the premium payment on time and my coverage was canceled what can I do?

You may want to contact your plan and ask if they will reinstate your coverage; however, if your coverage was terminated for not making the payment within the grace period, the plan is not required to reinstate your coverage. If you believe your coverage was canceled inappropriately, please contact an EBSA Benefits Advisor at 1.866.444.3272 for assistance.

If you have lost coverage, and are not eligible to enroll in a new employer's plan or a spouse's plan, you may want to contact your state department of insurance to get information about obtaining an individual policy. You may be able to cover your children under your state's Children's Health Insurance Program- call 1.877.KIDS.NOW (1.877.543.7669) or go to www.insurekidsnow.gov to find out about eligibility and enrollment.

Additionally, the Affordable Care Act provides that plans or issuers that make available coverage to dependent children must make such coverage available for children up to age 26. Because this provision has a varying applicability date, contact the plan to see if such coverage is available. The Affordable Care Act also established Pre-existing Condition Insurance Plans (PCIP) for those with pre-existing conditions. For information about how these plans work, go to www.healthcare.gov.

If you have limited income and resources (assets), you may want to contact your state to determine if you are eligible for Medicaid or other programs that may assist you in obtaining assistance with health coverage.

More COBRA subsidy coverage from BenefitsPro

 

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