Benefits In Brief

The Trade Act of 2002 created a health care tax credit (“HCTC”) for certain individuals who become eligible for trade adjustment assistance (“TAA eligible individuals”), as well as for certain retired employees who are receiving pension payments from the Pension Benefit Guaranty Corporation (“PBGC recipients”). Under the original HCTC provisions, eligible individuals could either claim a tax credit or receive advance payment of 65% of the premiums they pay for qualified health insurance, including COBRA continuation coverage. Special COBRA rights, including a second opportunity to elect COBRA coverage, also apply to TAA-eligible individuals and PBGC recipients.

As had been widely anticipated, Congress has extended the 65% COBRA premium subsidy yet again. Under the “Continuing Extension Act of 2010,” the subsidy will now apply to involuntary terminations occurring on or before May 31, 2010 (rather than March 31, 2010).

As widely reported in the news media, the recent extension of unemployment insurance benefits included a one-month extension of the 65% COBRA premium subsidy. Under the “Temporary Extensions Act of 2010,” the subsidy will now apply to involuntary terminations occurring on or before March 31, 2010 (rather than February 28, 2010).

A recent decision by an Illinois federal court (Majestic Star Casino, LLC v. Trustmark Insurance Co.) carries two important lessons for sponsors and administrators of self-funded health plans. Unfortunately for the plan sponsor involved in this case, those lessons came at a steep price — in the form of denied stop-loss claims.

As we reported in our December 2009 article, Congress and the President have extended the 65% COBRA premium subsidy enacted as part of the American Recovery and Reinvestment Act (“ARRA”). The maximum subsidy period is now 15 months (rather than 9), and the subsidy will now apply to COBRA coverage attributable to involuntary terminations occurring on or before February 28, 2010 (rather than December 31, 2009).

The Senate has now joined the House of Representatives in passing legislation to extend the federal government’s 65% COBRA premium subsidy. President Obama signed the bill into law on December 19, 2009. This date will therefore constitute the bill’s “enactment date,” to which many of the deadlines specified in the bill are tied.

The February 2009 economic stimulus package included a temporary 65% federal premium subsidy for individuals becoming entitled to COBRA coverage due to an employee’s involuntary termination of employment. Congress recognized, however, that the purpose of this subsidy could be undermined if disputes between employers and their former employees as to the subsidy’s availability took months or even years to resolve.

The American Recovery and Reinvestment Act (“ARRA”) gave the Department of Labor (“DOL”) 30 days to draft and issue model notices for use by employers and insurers in complying with the COBRA-related provisions of that economic stimulus package.  This 30-day period ended on March 19, 2009, with the DOL just barely meeting that deadline – by posting on its website four different model notices, along with an additional set of FAQs.

Among the items included in the recent economic stimulus package (formally known as the American Recovery and Reinvestment Act) is a temporary subsidy of COBRA premiums for involuntarily terminated employees. Although the Act omits language from the House bill that would have mandated an extension of COBRA coverage through age 65, it does require employers and other plan sponsors to facilitate this federal subsidy of COBRA premiums. The subsidy will cover 65% of the monthly premium, for a period of up to nine months.

A recent case in Pennsylvania illustrates the importance of understanding and documenting when COBRA premium payments are made. In Hall v. Glenn O. Hawbaker, Inc., the court found that a COBRA-qualified beneficiary had mailed her premium payment for September coverage on October 5th. Based on this finding, the court denied the beneficiary’s motion for a preliminary injunction that would have reinstated her COBRA coverage.

The method of delivering required COBRA notices is always a popular topic among plan administrators. COBRA contains no specific requirements as to the manner in which notice must be given. Generally, however, the plan administrator’s good faith effort to notify the participant, by mailing a notice to the participant’s last known address, is sufficient.