What is the COBRA/state continuation coverage premium subsidy?
The ARRA created a temporary premium subsidy for certain individuals (referred to as "assistance eligible individuals" or AEIs) with COBRA or comparable state continuation coverage. The federal government will subsidize 65% of the portion of the COBRA or state continuation coverage premiums that these AEIs pay. Among other requirements, the qualifying event that made the AEI eligible for COBRA or state continuation coverage must be the "involuntary termination" of the covered employee's employment that occurred some time between 9/1/2008 and 12/31/2009. AEIs also must be COBRA "qualified beneficiaries," so domestic partners cannot be AEIs.
What is considered "involuntary termination?"
According to the IRS Notice 2009-27, the following are examples of "involuntary termination" of employment (see the IRS Notice for more information and examples):
- Employee is fired (but note that if the termination is for gross misconduct, the termination is not a qualifying event, and the employee and any covered dependents are not eligible for COBRA)
- Employee is laid off
- Employee placed on furlough (reduction to zero hours)
- Employee resigns, but the employee knows that the employer will terminate employment if the employee does not resign
- Employee resigns because employer requires a material change in the geographic location of employment
- Employee quits due to an employer-imposed reduction in work hours that is a material negative change in the employment relationship for the employee
- Employee's employment contract was not renewed by employer at the time the contract expires, if the employee was willing and able to execute a new contract providing terms and conditions similar to those in the expiring contract and to continue providing the services
- Employee is terminated for absence from work due to illness or disability
- Employee is terminated for cause (but note that if the termination is for gross misconduct, the termination is not a qualifying event, and the employee and any covered dependents are not eligible for COBRA)
The following are not considered "involuntary termination" of employment:
- Employee voluntarily quits job
- Employee retires (except that it is an involuntary termination if, absent retirement, the employer would have terminated the employee's services, and the employee had knowledge that the employee would be terminated)
- Employee is absent from work due to illness or disability
- Dependent is overage (reached limiting age)
When does the subsidy go into effect?
This subsidy is effective no earlier than March 1, 2009, for plans with monthly premiums.
How long will the subsidy last?
For AEIs, the subsidy will continue until the first of the following occurs:
1. Nine months pass since the subsidy began.
2. The maximum period of continuation coverage required under COBRA or comparable state continuation coverage expires.
3. The AEI becomes eligible for coverage under another group health plan (with limited exceptions) or Medicare.
Can the subsidy be used for dental and vision continuation coverage?
For AEIs, the subsidy will apply to continuation coverage under COBRA or comparable state continuation coverage, including any vision or dental benefits it includes.
Can the subsidy be used for chiropractic, acupuncture, or other supplemental services?
For AEIs, the subsidy will apply to continuation coverage under COBRA or comparable state continuation coverage, including any complementary or alternative treatments it includes.