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New COBRA Notices (American Recovery and Reinvestment Act of 2009)

On March 19, 2009, the U.S. Department of Labor published model COBRA notices that became necessary after the recent enactment of the American Recovery and Reinvestment Act of 2009 (the "ARRA").  The ARRA has significantly increased employers' obligations under COBRA.  The ARRA entitles employees terminated involuntarily between September 1, 2008 and December 31, 2009 ("assistance eligible individuals") to continue health care coverage through COBRA by paying only 35% of their premiums for up to nine (9) months.  The remaining 65% is paid by employers, who may deduct the cost from their federal payroll taxes. Employers must immediately comply with the ARRA by providing notice to eligible individuals, collecting 35% of the premiums from the employees, paying 65%, and filing quarterly tax returns claiming a credit for the 65% subsidized amount.

The ARRA mandates that health plans notify certain current and former participants and beneficiaries about the premium reduction opportunity.  Each model notice is designed for a particular group of qualified beneficiaries.

General Notice (Full version).  Plans subject to COBRA must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a COBRA qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event, AND who either have not yet been provided an election notice or who were provided an election notice on or after February 17, 2009 that did not include the additional information required by ARRA.  This full version includes information on the premium reduction as well as information required in a COBRA election notice.

General Notice (Abbreviated version).  The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information.  It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have such coverage.

Notice in Connection with Extended Election Periods.  Plans subject to COBRA must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who: (1) Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and (2) Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.  This notice includes information on ARRA's additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

Alternative Notice (in certain states).  Insurance issuers that provide group health insurance coverage must send an Alternative Notice to persons who became eligible for continuation coverage under a State law similar to COBRA.  Continuation coverage requirements vary among States, and issuers will modify this model notice as necessary to conform it to the applicable State law.  Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

Copies of the new model COBRA notices may be obtained HERE.  Health plan administrators will need to tailor these COBRA notices to comply with the administrative procedures and other requirements of their group health plans.

Frequently Asked Questions (FAQs) for employers about COBRA premium reduction under the ARRA may be obtained HERE.

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