COBRA and the American Recovery and Reinvestment Act of 2009
If you signed up for or declined
COBRA coverage within the last six months, you may be receiving a notice soon from your former employer about the American Recovery and Reinvestment Act of 2009 (ARRA).
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ARRA at a Glance
► Your COBRA costs could be reduced by 65 percent for up to nine months if you meet eligibility requirements.
► If you originally decided not to use COBRA, you may be eligible for a 60-day special enrollment period to re-join your former employer’s plan at the reduced cost.
► Your former employer should let you know if you’re eligible no later than April 18, 2009. |
How ARRA Affects COBRA
ARRA provides a cost reduction of 65 percent of your COBRA premiums if you qualify. So, if you’re eligible to participate, you may only need to pay 35 percent of what you would normally pay for COBRA coverage while your former employer picks up the rest. This cost reduction would be in effect for up to nine months from the date of eligibility as described below.
Who Is Eligible
If your former employer terminated you between Sept. 1, 2008, and Dec. 31, 2009, and you made less than $125,000 per year as an individual or $250,000 per year when married and filling jointly, you could be eligible for reduced-cost COBRA.
Involuntary Versus Voluntary Termination
The ARRA provisions are for those people who were terminated by their former employer. Involuntary termination can include:
- Being laid off
- Losing your job because one of your former employer’s offices closed (but others remained open)
- Declining to relocate
- Agreeing to retire early
- Getting terminated for reasons not involving gross misconduct
If you had to leave your former employer for one of the above reasons, you can take advantage of reduced-cost COBRA. But, if you chose to leave your employer and they did not seek volunteers to do so, you are not eligible to get COBRA at a reduced cost.
How Healthcare Access Affects the ARRA
The ARRA COBRA provisions apply to people working in the private sector and eligible for COBRA or people working in the public sector (such as for the federal government, a state or municipality) and eligible for another type of continuing coverage and who meet the above criteria. However, if you do have access to other comprehensive healthcare such as that offered by Medicare or, if you started working again for a new employer, you cannot take part in reduced-cost COBRA.
When You’ll Know
Under ARRA, your former employer must let you know if you’re eligible to take advantage of the special enrollment period. You’ll be getting a notice from your former employer by April 18, 2009, telling you if you can re-join their plan at the reduced cost.
If You Chose Not to Use COBRA and Don’t Have Coverage
Those who originally chose not to take advantage of a former employer’s
COBRA coverage for whatever reason and still are not covered or don’t have access to affordable healthcare coverage can re-join a former employer’s plan to take advantage of the 65 percent cost reduction. If this sounds like you, you may be eligible for a special enrollment period of 60 days so you’ll have the chance to go back to your former employer’s coverage.
If You’re Using COBRA Now
If you have been using COBRA coverage since before February 17, 2009, and are eligible for the cost reduction, you won’t receive a refund for any premiums you paid before February 17 of this year. But, if you’ve paid full price for your COBRA premiums since February 17, 2009, and are eligible for reduced-cost COBRA, you may be able to get a credit toward future COBRA payments, or you could get a refund. To learn if you’re eligible for a credit or refund, contact your former employer.
If You Use or Become Eligible for Other Healthcare Coverage
If you now have access to affordable, comprehensive healthcare coverage (e.g. offered through employer or Medicare) or become eligible for such coverage, you cannot take advantage of lower-cost COBRA coverage, whether or not you are currently on COBRA. So, if you’re currently using your former employer’s COBRA coverage and are eligible for Medicare, whether due to age or disability, you will still have to pay the full price of COBRA coverage to keep it.
Also, your former employer is not obligated to extend the special enrollment period to you if you originally decided not to use COBRA. Having
Medicare coverage and attempting to take advantage of the cost reduction available to you under the ARRA can have serious consequences. Learn more about what having Medicare means
here.
Keeping COBRA after Becoming Eligible for Other Coverage
In general, all healthcare coverage is voluntary. That means that you have the choice whether or not to participate. So the decision to keep COBRA coverage until it expires or use Medicare or other coverage instead is entirely up to you. But, coverage such as that offered by a Medicare plan or other employer may prove to be far more cost effective while providing you the same level of coverage.
Additionally, there is a penalty for individuals who use reduced-cost COBRA, but are eligible for Medicare. The regulation requires individuals who could be using Medicare to pay the full price of COBRA premiums. If you don’t inform your employer that you are eligible for Medicare, then you may have to pay a penalty of 110 percent of the premium subsidy for your former employer’s plan.
How to Get Reduced-Cost COBRA under the ARRA
You should receive a notice from your former employer by April 18, 2009, letting you know whether you’re eligible for reduced-cost coverage and/or a special enrollment period under the ARRA. This letter will let you know what you need to do to take advantage of these provisions, when the cost reduction will become effective and how you can learn more.
If You Are Eligible for Medicare
Having Medicare, whether or not you actually use it now, means that you already have access to complete and affordable healthcare coverage. If you’re not using your Medicare now or haven’t yet enrolled because you’ve been using COBRA, you should seriously consider what
Medicare options are available.
Reviewing Your Medicare Options
Being eligible for Medicare means you have a wide variety of coverage options available to you. If you’re eligible for Medicare now or will be soon and want to learn more about what plans are available to you,
Allsup Medicare AdvisorSMcan help.
The Allsup Medicare Advisor will let you know which plans in your local area will work best for your individual needs. We’ll also provide guidance if you’re contemplating the transition from COBRA coverage to a Medicare plan. For more information, contact us at (888) 271-1173.