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Another Extension of COBRA Premium Subsidies

President Obama has signed the Continuing Extension Act of 2010, which extends the availability of the COBRA premium subsidy through May 31, 2010. This extends the eligibility period for the 65% COBRA premium subsidy to employees whose employment ends involuntarily through May 31, 2010. There are also bills currently before Congress which would further extend the COBRA premium subsidy through June 30, 2010.

An "assistance eligible individual" is an employee or a member of his/her family who elects COBRA coverage timely following a qualifying event related to an involuntary termination of employment that occurs at any point from: (a) September 1, 2008 through May 31, 2010; or (b) March 2, 2010 through May 31, 2010 if (1) the involuntary termination follows a qualifying event that was a reduction of hours; and (2) the reduction of hours occurred at any time from September 1, 2008 through May 31, 2010. A reduction of hours is a qualifying event when the employee and his/her family lose coverage because the employee, though still employed, is no longer working enough hours to satisfy the group health plan's eligibility requirements.

Generally, the maximum period of continuation coverage is measured from the date of the original qualifying event (for Federal COBRA, this is generally 18 months). However, as amended, the law provides that the 15 month premium reduction period begins on the first day of the first period of coverage for which an individual is "assistance eligible. This is of particular importance to individuals who experience an involuntary termination following a reduction of hours. Only individuals who have additional periods of COBRA (or state continuation) coverage remaining after they become assistance eligible are entitled to the premium reduction.

Assistance eligible individuals who pay 35 percent of their COBRA premium must be treated as having paid the full amount. The premium reduction (65 percent of the full premium) is reimbursable to the employer as a credit against certain employment taxes.

Model notices for the COBRA premium subsidy are available here.

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