No Premium Subsidy for Qualified Beneficiaries Eligible

To be an Assistance Eligible Individual (AEI) under the COBRA premium assistance rules, a qualified beneficiary must (1) be eligible for COBRA during the period that begins 9/1/08 and ends 12/31/09, (2) have a qualifying event of involuntary termination during that period, and (3) elect COBRA.

The most recent version of FAQs on the DOL website addresses two potentially tricky timing rules regarding who is eligible for premium assistance and for how long:

Q&A-1 – Clarifies that, under current law, an individual who does not become eligible for COBRA until after December 31, 2009 is not eligible for assistance even if the involuntary termination of employment occurs on or before December 31, 2009.

Q&A-2 – Clarifies that once an individual becomes an AEI (with involuntary termination and COBRA eligibility both occurring by December 31, 2009), he or she will continue to be eligible for a full nine months of premium assistance even if that period extends beyond December 31, 2009. In the example given in the Q&A, if an AEI started COBRA on November 1, 2009, the individual would be entitled to nine months of ARRA premium assistance from November 1, 2009 through July 31, 2010 so long as the individual remained eligible. (Under the rules, the period of premium assistance could be cut short, for example, if required premiums were not paid or if the AEI became entitled to Medicare or other group health plan coverage.)

The answers to both FAQs note that legislation pending in Congress to extend the premium assistance rules could change the answers to these questions. Even though the exact timing and terms remain uncertain, employers should be prepared for an extension. Until such an extension occurs, these FAQs may surprise employees terminated in December but covered by health plans that extend “active” coverage until the end of the month. Under the DOL’s interpretation of the current rules, those employees will miss out on premium assistance by one day because they will not technically become eligible for COBRA until January 1, 2010 (the day after they lose active coverage).

Employers should make sure they are in compliance with these new regulations which are now in effect. Please contact us for information or assistance.

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