COBRA AFTER THE AMERICAN RECOVERY REINVESTMENT ACT (ARRA)
By Timothy K. Cutler and Dolly Arjun
COBRA is a Federal law that gives employees who lose their jobs the right to purchase group health insurance coverage provided by their former employer. This allows employees to retain their group health coverage for up to eighteen months by paying 100% of the health insurance premiums.
The Federal COBRA law does not apply to employers with less than 20 employees; however, several states have mini-COBRA laws (including Massachusetts) that are similar to the federal COBRA law. In Massachusetts, employers who provide group health insurance coverage must offer COBRA if they have between 2-20 employees.
The American Recovery and Reinvestment Act (ARRA) of 2009 apply to all employers required to provide COBRA coverage under Federal and/or mini-COBRA laws. Under the ARRA, assistance-eligible individuals pay 35% and employers pay 65% of the COBRA health insurance premium cost for up to nine months. Employers are reimbursed in the form of tax credits against certain employment taxes. Employers can claim a credit on the IRS Form 941 on the Quarterly Federal Tax return.
Individuals are eligible to receive this subsidy if they have been terminated between September 1, 2008 and December 31, 2009 except in the following instances:
- Employee was terminated for "gross misconduct";
- Employee quit; or
- Employee gross' more than $125,000 ($250,000 for joint incomes).
Under COBRA and mini-COBRA, employers are required to notify their employees about the employees' right to elect COBRA after termination. Under the ARRA, employees can choose to elect COBRA coverage even if they had previously denied it, if they were terminated after September 1, 2008.
If the employer denies the employee's request for the premium reduction, the employee may request an expedited review of denial.