Eligible for COBRA Subsidy?

[Scott]

Here are the facts:

Employee is terminated involuntarily by Company A on October 15, 2008. Employee is hired by Company B and becomes covered under Company B's health plan on November 1, 2008. Employee declines COBRA under Company A's health plan.

Employee is laid off by Company B on March 15, 2009. Company B is a small employer exempt from COBRA so Employee is not given a COBRA election.

Is Employee entitled to a "second-chance" COBRA election under Company A's health plan?

As I read the statute, I'm coming to the conclusion that Employee is entitled to a second-chance election under Company A's plan, but is not eligible for premium assistance. I had never thought of that being a possibility, so I'd like to throw it out for others' thoughts.

An "assistance eligible individual" (AEI) is a qualified beneficiary if (a) at any time between 9/1/2008 and 12/31/2009 he is eligible for COBRA continuation coverage, (b) he elects COBRA, and © the qualifying event was involuntary termination during the period in (a). Employee satisfies (a) and © but not (b), so he is not an AEI.

The "second-chance" election period is available to an individual who does not have a COBRA election in effect on February 17, 2008 but who would be an AEI if an election were in effect. Under these facts, Employee didn't have a COBRA election in effect on February 17, 2008, but he would have been an AEI if he had elected COBRA. It appears that he is eligible for the second-chance COBRA election and if he makes the election, he will become an AEI.

An AEI is entitled to premium assistance, but the premium assistance will not apply with respect to any AEI for months of coverage beginning on or after the earlier of several events, one of which is the first date that the individual is eligible for coverage under any other group health plan. Since Employee was covered under Company B's plan, it appears that he will never be eligible for premium assistance.

So, it appears that Employee can elect COBRA under Company A's plan, but he will have to pay the full premium. Agree? Disagree?

[oriecat]

An "assistance eligible individual" (AEI) is a qualified beneficiary if (a) at any time between 9/1/2008 and 12/31/2009 he is eligible for COBRA continuation coverage, (b) he elects COBRA, and © the qualifying event was involuntary termination during the period in (a). Employee satisfies (a) and © but not (b), so he is not an AEI.

(b) should actually read "he elects COBRA (when first offered or during the additional election period provided by ARRA), so you cannot say that he does not satisfy (b) yet, when he hasn't had the new opportunity yet.

I think he qualifies, based on my reading.

[Guest Sieve]

Since he was actually covered by a Company B's health plan on 3/1/2009, then that would have made him ineligible for COBRA on both 2/17 & 3/1 (3/1 being the first period for which COBRA continuation premiums must be paid by an involuntarily terminated employee), and therefore he could not have been covered by COBRA had a COBRA election been in place at that time. So, doesn't that make him ineligible for the second-chance COBRA election period (since he cannot pay a premium for March, 2009 because he was covered under Company B's plan at that time and therefore was ineligible for plain vanilal COBRA coverage)?

[oriecat]

I was thinking the same thing first myself, but upon reading the documentation again, and looking at the form the DOL created, I am not sure. Look at the qualifying questions on the "Request for Treatment as as AEI" form...

To qualify you must be able to check "yes" for all statements

1. The loss of employment was involuntary

2. The loss of employment occurred at some point on or after 9/1/08 and on or before 12/31/09

3. I elected (or am electing) COBRA continuation coverage.

4. I am NOT eligible for other group health plan coverage (or I was not eligible for other group health plan coverage during the period for which I am claiming a reduced premium

5. I am NOT eligible for Medical (or I was not eligible for medicare during the period for which I am claiming a reduced premium.

I think this guy could say Yes to all of these, if he completed the form after March 15th. Neither the instructions nor the form say that the yes has to be as of the effective date of 2/17 or 3/1.

But that's just my take right now, and am open to being shown otherwise!

[Guest Sieve]

oriecat --

You are only eligible for the second chance election if you are an AEI. Non-AEI's do not get a second chance to choose COBRA continuation coverage for any other reason. If you were eligible for other coverage after termination of employment, you would normally be eligible for COBRA but you cannot be an AEI and therefore cannot pick up any COBRA coverage under the second chance election.

If you answer NO to your item 4 (and notice the parenthetical statement, too), then you cannot pick up subsidized COBRA (or any other COBRA, if you aren't currently paying COBRA premiums). Your e'ee has to answer NO to Item 4. So, no second chance COBRA election available.

What am I m issing?

[Scott]

oriecat --

You are only eligible for the second chance election if you are an AEI. Non-AEI's do not get a second chance to choose COBRA continuation coverage for any other reason. If you were eligible for other coverage after termination of employment, you would normally be eligible for COBRA but you cannot be an AEI and therefore cannot pick up any COBRA coverage under the second chance election.

If you answer NO to your item 4 (and notice the parenthetical statement, too), then you cannot pick up subsidized COBRA (or any other COBRA, if you aren't currently paying COBRA premiums). Your e'ee has to answer NO to Item 4. So, no second chance COBRA election available.

What am I m issing?

I think the 5 requirements referred to by oriecat are the requirements you have to satisfy to get the subsidy, not the second chance election. I agree that only an AEI is eligible for the subsidy, but I disagree with your statement that you are only eligible for the second chance election if you are an AEI. The provision governing the second chance election reads as follows:

"For purposes of applying section 605(a) of [ERISA], section 4980B(f)(5)(A) of [the Code], section 2205(a) of the Public Health Service Act, and section 8905a©(2) of title 5, United States Code, in the case of an individual who does not have an election of COBRA continuation coverage in effect on the date of the enactment of this Act but who would be an assistance eligible individual if such election were so in effect, such individual may elect the COBRA continuation coverage under the COBRA continuation coverage provisions containing such sections during the period beginning on the date of the enactment of this Act and ending 60 days after the date on which the notification required under paragraph (7)© is provided to such individual."

You are eligible for the second chance election if you are NOT an AEI but would be if you had an election of COBRA continuation coverage in effect. This provision doesn't say anything about coverage under another plan. All it seems to require is that you didn't have a COBRA election in effect on February 17 and the only thing keeping you from being an AEI is a COBRA election. By making the second chance election, you BECOME an AEI and eligible for the subsidy unless some other provision disqualifies you. In this example, I think it's the prior eligibility for the other plan that disqualifies him for the subsidy, but I don't see how he doesn't qualify for the second-chance election.

[oriecat]

Why would he have to answer No to #4? If he filled out the form today, he is not eligible for any other coverage right now.

[Guest Sieve]

Ok. I stand corrected--a non-subsidized individual may still be eligible for the second chance election. (I'm obviously still trying to sort all this out.) The questions oriecat lists, however, are only for those trying to get the subsidy--but, if you're requesting the subsidy as part of the second chance election, then the availability of coverage during any period after 2/17 would eliminate the potential for receiving the subsidy.

So, Employee was an AEI on 2/17, and therefore would be eligible for second chance COBRA continuation as of 2/17 under ARRA. But, Employee could not maintain COBRA coverage from 3/1-3/15 due to coverage under another plan. And, there generally is no opportunity to pick up second-chance COBRA except as of 3/1. If the premium coverage periods were quarterly, then perhaps the first coverage period after 2/17 would be 4/1--but if the first coverage period is 3/1, how is Employee eligible for COBRA under the plain vanilla COBRA rules? Seems like Employee's an AEI but cannot sign up for second-chance COBRA due to coverage under another group plan during part of the period--Employee cannot be covered under COBRA in that circumstance. Yes?

[Guest WilliamT]

One part of the analysis that I think still needs to be examined is the rule that the ARRA COBRA provisions do not extend the period that the individual could have had COBRA if that person had elected COBRA (or actually did elect COBRA) based on the involuntary termination event that gave rise to their COBRA rights. In the example given, I think the initial COBRA period would have terminated upon becoming covered by another group health plan. Based on that, There is no ability to extend COBRA by a second election under ARRA in that example. I think one of the examples discussed at the end of the 3/24/09 government webcast involved the question of whether someone could qualify twice for a second election if involuntarily terminated during the 9/1/08 - 2/16/09 window, got rehired and covered by another employer plan, and was again involuntarily terminated before 2/17/09. I haven't gone back to listen to that program again, but my recollection is that they responded that the COBRA rights raised by the first termination ended upon coverage by the next employer, so no second election could be based on that first termination. Seems like the same rationale would apply here, with the unfortunate result that the second termination may not qualify the individual either unless there is some applicable state law continuation coverage for the particular employer's program.

[Scott]

I had not been able to listen to the DOL webcast, but I just did. The example you refer to had slightly different facts. In the example, the individual was involuntarily terminated after 9/1/08 and elected COBRA under his employer's plan, and then got a new job and became covered under the new employer's plan, which ended the COBRA coverage under the first employer's plan. The speaker said "your extended election right only goes as long as your maximum period of COBRA coverage, and your maximum period of COBRA coverage ends when you have coverage under another plan." He concluded by saying the initial period of COBRA was completely extinguished when he had coverage under the second plan, so the only plan under which he would have a right to COBRA is the second plan. I have no problem with that conclusion.

However, in our fact pattern, the individual never elected COBRA under the first employer's plan. Under the normal COBRA rules, COBRA coverage terminates on the date, AFTER THE DATE OF THE COBRA ELECTION, upon which the individual first becomes covered under another plan. The regs say that if an individual first becomes covered under another plan on or before the date on which COBRA is elected, then the other coverage cannot be a basis for terminating COBRA coverage. So, I think the rationale under the DOL's example for denying the second chance election doesn't apply here.

[Guest WilliamT]

Scott makes good points. In light of those, I'd have to conclude that the individual here would technically be an AEI eligible for the second election, but not eligible for the subsidy due to the presence of the other coverage on 2/17/09 when the law was effective. The way the statute is written, the other coverage doesn't appear to adversely impact the person's status as an AEI as long as it didn't adversely impact the person's ability to have elected and maintained COBRA initially. Steve suggested the individual "could not maintain COBRA coverage from 3/1-3/15 due to coverage under another plan", but I think the analysis pointed out by Scott demonstrates, at least technically, that the individual could make a second election for COBRA despite the presence of the other coverage because the COBRA election is made AFTER first becoming covered by the other employer plan.

I have trouble with this outcome, i.e., the ability to elect COBRA on such a deferred basis and yet not be eligible for the subsidy which is the whole purpose behind allowing the second election. As far as I can tell, nowhere have the agencies involved or the legislative history suggested this was an intended outcome. The individual had his chance to elect COBRA after becoming eligible for the other employer's plan and declined, presumably because he felt he had a better deal (which, unfortunately, did not in this scenario include continuation rights under any state law). Even if this person had elected COBRA after obtaining coverage under the other employer, I think the same result applies as far as not being eligible for the subsidy due to the other coverage. The DOL notification forms and application for AEI treatment appear to all be designed under the assumption (and intent?) that this law is directed only at making people eligible for the premium reduction. The very term "assistance eligible individual" presumes that the person who is eligible will be getting the "assistance" of the premium reduction. No other "assistance" is discussed that I can find. Consequently, this may just be a matter of technical statutory language versus statutory intent, and I won't digress into that discussion. The individual in the example certainly has a case if he wants a second bite at the regular COBRA benefit from the first employer, but there's a definite balancing of cost vs. benefit-to-be-gained that one would need to examine. I think it's pretty clear there's no subsidy to be gained.