COBRA 2010

On April 15, 2010, President Obama signed into law the Continuing Extension Act of 2010 (H.R. 4851), part of which provides a temporary extension to eligibility for federal COBRA premium subsidies. As a practical effect of this legislation, California employees laid-off or terminated before May 31, 2010 may be entitled to receive a substantial government subsidy to apply towards their health insurance premiums under their former employer’s health plan.

The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA, is a law signed by former President Reagan. In relevant part, COBRA created an insurance program that allows some employees to maintain their former employer’s health insurance coverage after leaving employment for up to 18 months. Essentially, employers receive tax incentives to implement a health plan which provides temporarily continued coverage to employees who are terminated, laid-off or otherwise lose coverage due to some qualifying event. The purpose is to provide coverage for a set period of time or until an alternative source of health insurance is secured.

Historically, COBRA did NOT require the employer to pay for the cost of providing continuation coverage. Rather, the former employee must make the premium payments to maintain coverage under the employer’s health plan. However, in response to the recent economic meltdown, Congress recently enacted legislation that amended and supplemented COBRA.

The first of these supplementary laws is the American Recovery and Reinvestment Act of 2009 (ARRA), which provides for a 65% federal subsidy of COBRA-enabled insurance, for up to 9 months after an employee’s involuntary termination, so long as the employee has no other group sponsored health insurance option and is otherwise eligible to enroll in COBRA. Second, the Department of Defense Appropriations Act extended COBRA subsidy eligibility to employees terminated before February 28, 2010, and extended the 9 month subsidy period to 15 months. Third, the Temporary Extension Act of 2010 extends COBRA subsidy eligibility to employees terminated before March 31, 2010, which was later extended to May 31, 2010 by the Continuing Extension Act of 2010.

Therefore, under the current scheme, if you were terminated, laid off, or otherwise lost your eligibility to participate in your former employer’s health plan prior to May 31, 2010, you and your immediate family are potentially entitled to a 15 month continuance of that former coverage. Moreover, if qualified for such coverage, you may be eligible to have the federal government pay 65% of the cost of your premiums for 15 out of the 18 months.

Qualifying employers are required to notify all terminated employees of their potential rights to COBRA and ARRA benefits. So, if you were recently terminated and not notified of your potential rights under COBRA, you should contact your employer immediately to request their COBRA information package. For more information on whether you qualify and how to apply, please visit http://www.dol.gov/ebsa/cobra.html & http://www.dol.gov/ebsa/newsroom/fscobra.html.