COBRA Subsidy Extension and Those Whose Initial 9 Months Expires Today (12/31/09)

[401 Chaos]

Help. I am having a difficult time parsing some of the language in the legislation amending the ARRA subsidy provisions, particularly the definition of a "transition period" contained in the amendment. I do not understand how the notice and retroactive reinstatement provisions apply to individuals who lose their 9 months of coverage today (December 31, 2009) and thus would have to pay the full COBRA premium to continue coverage if not for the amendment.

Assume for, example, that an individual was fired at the end of March 2009 and lost coverage April 1, 2009. The individual signs up for COBRA and qualifies for the ARRA subsidy and has been receiving the premium subsidies for the last 9 months (April thru Dec. 2009). The original 9 month subsidy period ends today. Also assume the individual is not aware of the change in law but knows the COBRA premium was supposed to jump to the unsubsidized COBRA rate beginning January 2010. The January 2010 premiums are due the first of Jan but there is a standard 30-day grace period. Thinking he has to pay the full COBRA premium which he cannot afford, the indivdual does not pay COBRA premiums during January and thus loses COBRA coverage for failure to pay the premium during the applicable grace period.

Although the individual is entitled to notice of the change in the COBRA subsidy provisions (including the right to receive 6 more months of subsidized premiums), as I read the law, the employer does not have to provide that notice until February 17, 2010. By that time, the individual described above would have failed to pay COBRA premiums for January 2010 and thus lost COBRA coverage by the time he learns of the 6-month subsidy extension.

Although the amendment permits certain AEIs who exhaust their 9 months of coverage and fail to elect continued COBRA to have that coverage retroactively reinstated under certain circumstances, my reading of the legislation is that such rights only apply with respect to coverage periods / transition periods beginning prior to enactment of the amendment (i.e., prior to Dec. 19, 2009). To me, that generally means retroactive reinstatement would generally only be available for the December 2009 coverage period (assuming monthly COBRA administration). As such, the definition of "transition period" in the legislation seems to limit rights to retroactively reinstate COBRA coverage to coverage for December 2009--the first month the initial 9-month COBRA subsidy period would expire.

Because the January 2010 coverage period begins after enactment of the amendment (i.e., it begins on January 1, 2010 so after the December 19, 2009 enactment date), that coverage period does not appear to be within an AEI's "transition period" as defined in the legilslation. As a result, the retroactive reinstatement rules in the legislation would not appear to expressly apply to January 2010 coverage that lapses before individuals are officially notified that they can pay a reduced premium.

That result does not seem correct to me. I fear I must be misinterpreting the transition period definition or missing something else. Could someone please help clarify? Thanks.

[GMK]

Without looking into the technicality you describe regarding the transition period (you may be right),

just send a simple notice to those who are eligible for the additional 6 months of subsidy soon. The law does not require employers to wait until February 17 (which deadline may be to give time for the department to generate a sample notice.)

Considering the intention of the law, people who drop COBRA in January as in your example and who receive the notice in February will probably be allowed to be reestablished on COBRA in January. I'd send the notice now to avoid the administrative hastles of going back to fix it retroactively.

[401 Chaos]

Thanks. I agree they likely could head off most problems by giving those that lost coverage on Dec 31 notice of the change before the January grace period ends (even if not the full blown notice / discussion that the DOL may eventually provide in its model notices). Just curious though if they really mean to suggest that there would be no retroactive reinstatement for these folks--I know not all employers will get the word out to all these individuals without somebody failing to understand their rights to an additional 6 months of subsidized premiums

[401 Chaos]

I haven't seen much discussion of this specific issue. Did run across a couple of legal alerts since that suggest there is something of a gap in the statute given the technical definition of transition period that is used here but that it likely was intended to cover folks first exhausting their 9 months of COBRA subsidies on Dec. 31, 2009 as well.

Interestingly, the current draft of the model DOL notices that presumably were forwarded to OMB for review would appear to permit retroactive reinstatement of coverage for January 2010 coverage as well as Dec 2009 coverage by noting the following:

"Under normal circumstances, you have a grace period of at least 30 days after the first day of the coverage period to make each periodic payment. If you fail to make a periodic payment before the end of the grace period for that coverage period, you would lose all rights to continuation coverage under the Plan. However, the Department of Defense Appropriations Act, 2010 provides an extended period of time for certain periods of coverage. If you have reached the end of the reduced premium period before the legislation extended it to 15 months, you can make a retroactive payment of the reduced premium(s) for the period(s) of coverage immediately following what would have been the last period subject to the premium reduction. This payment must be made by February 17, 2010 or, if later, within 30 days from the date this notice was provided to you."

[GMK]

or, if later, within 30 days from the date this notice was provided to you."

I think you found the answer regarding January 2010 here.

[401 Chaos]

Let's hope so, although technically I suppose the DOL might take the position that the statute itself limits the ability to retroactively reinstate coverage for transition periods beginning immediately prior to Dec. 17th.