COBRA Subsidy

[jpod]

Employee is fired/laid off in December 2009. As is common, his coverage under the group health insurance is paid for and continues through Dec. 31, 2009. No further extension beyond the end of December will be initiated by employer, unless employee elects COBRA. Is employee an assistance eligible individual? Stated another way, does he experience a "loss of coverage" on Dec. 31, in which case he would be an AEI, or does he experience the loss of coverage on Jan. 1, which means he is not an AEI? Q&A 14 of Notice 2009-27 suggests to me that the loss of coverage would occur on Dec. 31, but that Q&A does not purport to address my question and as such it is "dicta."

[GMK]

My understanding is that the person is covered on Dec. 31 and not covered on Jan. 1, so the loss of coverage is on Jan. 1.

I see what you mean about the language in Q&A 14 in 2009-27, ('coverage ... would normally end on November 30...'). It would be clearer if it said that the last day of coverage is November 30, but in any case, the person is fully covered on Nov. 30, and is not covered the next day. At least that's how I see it.

There's not been much publicity about having to lose both the job AND the coverage before the end of 2009, so some people may be disappointed to learn that their COBRA isn't subsidized in this case.

[jpod]

GMK: Actually, if you study the example in Q&A 14 is says that, based on the facts of the example, the "loss of coverage occurs on May 31, 2010." That is the dicta to which I was referring.

[oriecat]

This is an interesting question. I always assumed that through December people could get the subsidy. But Q-10 says :

Under ARRA, an assistance eligible individual is a qualified beneficiary as the result of an involuntary termination that occurred during the period from September 1, 2008, through December 31, 2009, is eligible for COBRA continuation coverage at any time during that period, and elects the COBRA continuation coverage.

Bold added by me. In my mind, this person isn't eligible for COBRA until Jan 1st, so no they wouldn't be eligible for the subsidy, under how I am reading this part of the notice.

[jpod]

oriecat: I agree with your reading of the language in Q&A 10. However, the Notice articulates the rule with more specificity in Q&A 13 by saying that there must be a loss of coverage on or before Dec. 31, 2009, and the example in Q&A 14 at least implies that if coverage continues through the end of the month there is a "loss of coverage" on the last day of the month.

[GMK]

jpod - I agree with you entirely about the wording. It says the loss of coverage is on May 31.

oriecat's comment clarifies this a bit for me. The subsidy depends on when one is eligible for COBRA, not when one "loses coverage." In the lingo, you may "lose coverage" on December 31 (probably at 11:59:59 p.m.), but you are not eligible for COBRA on December 31. You are eligible for COBRA on January 1.

[oriecat]

The Summary of ARRA provisions, contained in the model notices that the DOL put out also put it in terms of when you are eligible for continuation coverage, not when the loss of coverage was.

To be considered an “Assistance Eligible Individual” and get reduced premiums you:

* MUST be eligible for continuation coverage at any time during the period from September 1, 2008 through December 31, 2009 and elect the coverage;

However, if you just go by the model Request For Treatment form, you can easily check all 5 boxes, since it doesn't ask when the COBRA eligibility date is.

[jpod]

oriecat: I kinda think that in designing the Request for Treatment form nobody at DOL/IRS was thinking about the Dec. 31/Jan. 1 conundrum.

[oriecat]

I'm sure. There are lots of things they don't think about.

[Guest Benefit Specialist]

From what I'm hearing and reading, the question will probably be pointless as the subsidy is most likely going to be extended past 12/31/09.

[jpod]

not pointless, merely deferred