357 / What special rules applied to COBRA premium assistance under legislation enacted in 2009 and 2010?

An assistance eligible individual was eligible for the premium reduction for up to 15 months as extended under the Department of Defense Appropriations Act of 2010 from the first month the premium reduction provisions applied to the individual. The premium reduction ended if the individual became eligible for coverage under any other group health plan or for Medicare benefits.²

Reduced Premium Amount

In the case of any premium for a period of coverage beginning on or after February 17, 2009, an assistance eligible individual was treated for purposes of any COBRA continuation provision as having paid the amount of such premium if the individual paid 35 percent of the amount of the premium, determined without regard to the premium assistance provision.³ The employer was reimbursed for the other 65 percent of the premium that was not paid by the assistance eligible individual through a credit against its payroll taxes.⁴

The premium used to determine the 35 percent share that must have been paid by or on behalf of an assistance eligible individual was the cost that would be charged to him or her for COBRA continuation coverage if the individual were not an assistance eligible individual. Thus, if, without regard to the subsidy, an assistance eligible individual was required to pay 102 percent of the applicable premium for continuation coverage, that is, the maximum generally permitted under COBRA rules, the assistance eligible individual was then required to pay only 35 percent of the 102 percent of the applicable premium.

If the premium that would be charged to the assistance eligible individual was less than the maximum COBRA premium, for example, if the employer subsidized the coverage by paying all or part of the cost, then the amount actually charged to the assistance eligible individual was used to determine the assistance eligible individual’s 35 percent share.⁵

In determining whether an assistance eligible individual had paid 35 percent of the premium, payments made on behalf of the individual by another person, other than an employer with respect to which an involuntary termination occurred, were taken into account; for example, by a parent, guardian, state agency, or charity.⁶

Premium Reduction Period

The premium reduction applied as of the first period of coverage beginning on or after February 17, 2009 for which the assistance eligible individual was eligible to pay only 35 percent of the premium, as determined without regard to the premium reduction, and still be treated as having made full payment. For this purpose, a period of coverage was a monthly or shorter period with respect to which premiums were charged by the plan with respect to such coverage.⁷

The premium reduction applied until the earliest of:

(1)     the first date the assistance eligible individual became eligible for other group health plan coverage, with certain exceptions, or Medicare coverage;

(2)     the date that was 15 months (under the Department of Defense Authorizations Act of 2010; it was nine months under ARRA 2009) after the first day of the first month for which the ARRA premium reduction provisions applied to the individual; or

(3)     the date the individual ceased to be eligible for COBRA continuation coverage.⁸

Coverage Eligible for Premium Reduction

The premium reduction was available for COBRA continuation coverage of any group health plan, except a flexible spending arrangement (“FSA”) offered under a cafeteria plan, including vision-only and dental-only plans as well as mini-med plans. The premium reduction was not available for continuation coverage offered by employers for non-health benefits that were not subject to COBRA continuation coverage, for example, group life insurance.⁹

Retiree health coverage could have been treated as COBRA continuation coverage for which the premium reduction was available only if the retiree coverage did not differ from the coverage made available to similarly situated active employees. The amount charged for the coverage could be higher than that charged to active employees and the retiree coverage still may have been eligible for the ARRA premium reduction so long as the charge to retirees did not exceed the maximum amount allowed under federal COBRA.¹⁰

The premium reduction also was available for COBRA continuation coverage under a health reimbursement arrangement (“HRA”). Although an HRA may qualify as an FSA, the exclusion of FSAs from the premium reduction was limited to FSAs provided through a cafeteria plan, which would not include an HRA.¹¹

Premium Reduction Extension under DDAA 2010

The Department of Defense Appropriations Act of 2010 (“DDAA 2010”) amended ARRA 2009 by extending the period to qualify for the COBRA premium reduction until February 28, 2010, a period further extended to May 31, 2010, under the Continuing Extension Act of 2010, and extending the maximum period for receiving the subsidy an additional six months (from nine to 15 months).¹²

Assistance eligible individuals who had reached the end of the original premium reduction period were in a transition period which gave them additional time to pay extension-related reduced premiums.¹³ An individual’s transition period was the period that began immediately after the end of the maximum number of months, which generally was nine, of premium reduction available under ARRA prior to its amendment. An individual was in a transition period only if the premium reduction provisions would continue to apply due to the extension from nine to 15 months and they otherwise remained eligible for the premium reduction.¹⁴ These individuals must have been provided a notice of the extension within 60 days of the first day of their transition period.¹⁵ The retroactive payment or payments for the period or periods of coverage must have been made by the later of February 17, 2010, or 30 days from when the notice was provided.¹⁶

DOL Procedure for Denial of Premium Reduction

The Department of Labor issued a fact sheet entitled “COBRA Premium Reduction” that explains its expedited review of denials of premium reduction. The DOL states that individuals, who are denied treatment as assistance eligible individuals and, thus, are denied eligibility for the premium reduction, whether by their plan, employer, or insurer, were entitled to request an expedited review of the denial by the DOL. The DOL was then required to make a determination within 15 business days of receipt of a completed request for review.