Proposed ARRA COBRA Extension Has Employers Scrambling

Legislation to extend and enhance the COBRA subsidy was introduced last week in the Senate (S.2730) and the week before in the House of Representatives (HR. 3930). This proposed legislation will continue COBRA health care coverage for another six months to those who have been laid-off and their families. Though this is a great help for Americans on tight budgets, this proposal will leave employers scrambling.

COBRAGuard, a certified COBRA administrator, urges all employers to get ready for the extension. "Employers and COBRA participants will have to prepare for changes and be patient as lawmakers make up their minds," said Robert Meyers, President of COBRAGuard Inc.

The American Recovery and Reinvestment Act of 2009 (ARRA), which was enacted back in February, currently includes a 65 percent COBRA subsidy that helps defray COBRA insurance premiums for up to 9 months. The proposed legislation would extend it by another 6 months, giving Assistance Eligible Individuals (AEIs) up to 15 months of subsidized COBRA. This time though, the proposal seeks to increase the subsidy to 75 percent for the affected AEIs. "Since the subsidy was introduced, studies have shown that the number of COBRA participants has doubled and the amount of work related to COBRA administration is three to five times what it was due to the confusion, tax implications and new reporting requirements under ARRA," said Cathryn Scivicque, Vice President of Employer Services.

The "twist" in the bill that will majorly affect employers is the subsidy increase, growing from 65 percent to 75 percent. It is still unclear as to whether the increase in subsidy will apply to all current ARRA-eligible COBRA participants, newly unemployed, or both. It is also unclear if those who have received 65 percent will be entitled to any adjustment for their time already on COBRA to gain parity with those who are now at 75 percent.

"Since ARRA passed earlier this year, COBRA administration has been a messy proposition," says Meyers. "Now, it will be even messier." Meyers urges employers to be ready with the proper documents prepared. Communications should include all changes, how they affect participants and how payments will change. Once participants are notified of the extension, employers should continue to inform participants of impending deadlines and expirations.

"For many employers, the best way to navigate through all of this is by outsourcing to a professional," says Meyers. "Especially now, as employers continue to cut jobs in this economy."

Using a COBRA administrator and keeping good documentation will help relieve the stress and workload from human resources and payroll departments. From reporting issues to communications, a COBRA administrator offers the right tools to keep participants' schedules and timelines in line.

About COBRAGuard Inc.

COBRAGuard Inc. is a Certified COBRA Administrator (CCA), helping employers control risks and liabilities, prevent adverse claims and save time and money. The company serves more than 3,000 organizations nationwide and it stands behind its services with a 100 percent compliance guarantee. For more information, visit the company's Web site at http://www.cobraguard.net.

illinois
2009-11-19
Find out more about the ARRA act here Illinois insurance policy from the Illinois office

Linton
2009-11-19
If an employer is paying for a lot of a former employer's COBRA premium for the initial 6 month period after termination, but will no longer subsidize after that, it seems more likely to delay the 65% ARRA COBRA nine month premium subsidy until the employee needs to pay 100% of the premium. Can the 65% COBRA subsidy under ARRA be delayed for a period of time (such as 6 months as in a case like this) to apply it to a nine month period when it is needed most?

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