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

Ordinarily, if an unemployed worker elects to receive COBRA continuation coverage, the percentage of the applicable premium that may be charged can be as high as 102 percent ( Q 368). In February 2009, Congress enacted temporary relief to help scores of unemployed workers maintain their health insurance coverage by making it more affordable.¹ Essentially a 65 percent subsidy or premium assistance was available for COBRA continuation coverage premiums for certain workers who had been involuntarily terminated as the result of a COBRA qualifying event occurring during the period from September 1, 2008, through May 31, 2010, as extended under the Continuing Extension Act of 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.