NJ Labor And Employment Law

The New Jersey Labor and Employment Law Blog is authored by Jay S. Becker and Joseph C. DeBlasio, shareholders in the Labor and Employment Law Practice Group, with support from the associates in the Group. It is dedicated to provide news and updates regarding all labor and employment matters throughout New Jersey.

Extended and Expanded COBRA Relief

January 6, 2010 | No Comments
Posted by Jay S. Becker

On December 19, 2009 President Obama signed the 2010 Department of Defense Appropriations Act (DOD Act), which provides extended and expanded COBRA premium relief to countless involuntarily unemployed Americans from what was originally provided under the American Recovery and Reinvestment Act of 2009 (ARRA).  And stay tuned, because there is other legislation pending in the form of a Jobs bill, that may extend and expand the COBRA coverage subsidy even further than the DOD Act.

The new law extends the 65% COBRA premium subsidy through February 28, 2010 for certain assistance-eligible individuals, namely those that involuntarily lost their jobs resulting in the loss of group health care.  The subsidy under the ARRA was originally set to expire on December 31, 2009.

Another very important change in the DOD Act from the ARRA is that an assistant-eligible individual no longer has to be actually participating in COBRA by the deadline, as was required under the ARRA.  Rather, as long as the individual qualifies for COBRA by February 28, 2010 (i.e. is involuntarily terminated on or before February 28th), the subsidy would be available irrespective of when COBRA coverage actually begins.

And the last notable change is that the new law expands the length of time the subsidy is available to a qualified individual to a maximum period of 15 months, 6 months longer than the original period of only 9 months under the ARRA.  Thus, as long as a qualified individual is involuntarily terminated on or before February 28, 2010, that individual will have up to 15 months of subsidy eligibility.

As a result of these changes, employers, insurers and/or health insurance plan administrators have certain notice requirements that must be sent to assistance-eligible individuals.  Unfortunately, the Department of Labor has yet to provide any model notices which may be used or followed, although model notices are expected by the DOL soon.  While notice forms have yet to be provided, notice nevertheless still needs to be provided within defined time frames under the new law.  Failure to provide notice of the new law is deemed no different than a failure to provide an initial COBRA election of coverage notice, and may result in similar penalties.

In addition to notice requirements, there are tricky “transition” issues that have arisen as a result of the new law.  For example, since the previous law provided only a 9 month subsidy period, once that 9 month subsidy period expired, there are scores of qualified individuals who let the coverage lapse for various reasons, such as not being able to afford the full COBRA premium.  Those assistance-eligible participants that let the coverage lapse once the subsidy expired because they could not afford the full premium, may now be entitled to retroactive reinstatement of coverage.  Others, for example, decided to not let the coverage lapse but rather paid the full COBRA premium once the 9 month subsidy period expired.  Under the new law, those eligible participants that paid the full premium once the subsidy expired would be entitled to either a refund or a credit on future premium payments.

The above reflect the critical changes to the COBRA premium subsidy under the new DOD Act.  The majority of other criteria required for the COBRA premium subsidy under the ARRA has for the most part remained unchanged.

We will update this blog as more information becomes available, such as when the Department of Labor issues a form of notice compliant with the DOD Act, and if further legislation is passed that extends the COBRA premium subsidy rights again.


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