On March 2, 2010, President Obama signed the Temporary Extension Act of 2010 extending eligibility for the ARRA premium subsidy through March 31, 2010.  Effective immediately, this law applies to both COBRA and NC State Continuation coverage with additional provisions and enforcement changes as detailed below.

Eligibility Extended, COBRA Coverage Remains Same
As discussed in the Compliance Alert dated December 22, 2009, subsidy eligibility was previously extended to cover involuntarily-terminated employees through February 28, 2010.  However, this latest extension will allow employees who were terminated involuntarily through March 31 to claim subsidy benefits.

Employers also should note that the Act does NOT extend the period of premium reduction or the COBRA coverage period.  The period of premium reduction remains 15 months for eligible individuals and the maximum period of COBRA coverage is 18 months from the original qualifying event.

Additional Group of Subsidy-Eligible Individuals, New Election Period
Under prior subsidy rules, only those individuals whose qualifying event was an involuntary termination were eligible for the subsidy.  However, the Act amends the definition of an assistance eligible individual (AEI) to include individuals who experienced a reduction in hours followed by an involuntary termination.  Now, the definition of an AEI includes individuals who:

• Had a qualifying event of reduction of hours on or after September 1, 2008, that caused a loss of coverage; and
• Are involuntarily terminated on or after March 2, 2010, and on or before March 31, 2010. 

The Act also provides a new election period for this additional group of subsidy-eligible individuals who did not elect COBRA following their reduction of hours (or later dropped their COBRA coverage).

EMPLOYER ACTION ITEM:
Employers must provide these individuals with the ARRA General Notice within 60 days of their involuntary termination including information about the new right to elect COBRA and receive subsidized coverage.  The DOL has plans to update its ARRA Fact Sheet and FAQ document, and additional model notice language may be forthcoming.   

Employers should take note of the following administrative issues associated with the new election period:

• The maximum 18-month period of COBRA coverage is measured from the original qualifying event of reduction of hours.
• An AEI electing COBRA under this new election right is not required to pay premiums for COBRA coverage between the reduction of hours and the involuntary termination in order to elect COBRA.  Rather, the AEI will be receiving and paying for COBRA on a go-forward basis at the subsidized rate. 
• Any gap in coverage between the reduction of hours and the involuntary termination is not counted toward a 63-day break in coverage under the rules of HIPAA.

Enforcement Changes and Protection for Employer Determinations
Under new enforcement provisions of the Act, if a plan continues to deny a subsidy request after the Department of Labor has ruled in favor of the former employee, a $110 per day penalty may be imposed starting 10 days after the plan’s receipt of the DOL determination. 

EMPLOYER ACTION ITEM:
Employers who receive an appeal decision from the DOL in favor of the former employee need to take immediate action to provide subsidized coverage.

Additionally, the DOL will not challenge an employer’s decision to provide the subsidy to a former employee as long as the employer’s decision is based on a reasonable interpretation of ARRA and the employer maintains documentation to support its decision.

Additional Extensions on the Horizon?
There are currently two bills pending before the Senate that could further extend eligibility for the ARRA premium subsidy:

• The Jobs for Main Street Act (H.R. 2847), which would extend eligibility for the COBRA subsidy through June 30, 2010.
• The American Workers, State, and Business Relief Act of 2010 (H.R. 4213), which would extend eligibility for the subsidy through December 31, 2010.

HCW will continue to keep you updated through Compliance Alerts regarding any laws amending the subsidy provisions.  In the meantime, you can view the provisions of the Temporary Extension Act of 2010 online, or if you have any questions about the recent changes to the premium subsidy, you may contact our office at 919-403-1986.