Federal Stimulus – Group Coverage Continuation Subsidy
The American Recovery and Reinvestment Act ("ARRA"), as amended, and Georgia law (O.C.G.A. Section 33-24-21.1) provide a subsidy that may reduce, by 65% the cost of COBRA or Georgia state group health continuation insurance coverage for workers who lose their jobs.
What Are Group Coverage Continuation Laws?
Group coverage continuation laws require employers to offer employees who lose group coverage the opportunity to continue their employer-based health insurance or employer self-funded coverage. COBRA is the federal law that requires employers with 20+ employees to provide group continuation coverage for up to 18 months in most cases, but perhaps longer in cases of disability or other circumstances. For federal COBRA information, please contact the U.S. Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html). Who is Eligible for Subsidized Coverage under the New Law?
Georgia’s state group continuation law requires insured employers of any size, including those with fewer than 20 employees, to provide group health continuation coverage. Individuals not eligible for treatment as "assistance eligible individuals" under ARRA and who have at least 6 months prior health insurance coverage are eligible for state continuation coverage from their employer’s insurer for the fractional month of their termination from employment, plus 3 months additional continuation coverage. The citation is O.C.G.A. Section 33-24-21.1(c)(1) and this law is available through Lexis-Nexis at http://www.lexis-nexis.com/hottopics/gacode/Default.asp
How Do Individuals Sign Up for the Subsidy?
Generally, “assistance eligible individuals” – individuals losing group health coverage because of an involuntary termination ("former employees") between September 1, 2008 and May 31, 2010 are now eligible for a 65% federal subsidy of their federal COBRA for up to 15 months or state continuation coverage premiums, also for up to 15 months. (An involuntary termination of employment that occurs on or after March 2, 2010 but by May 31, 2010 and follows a qualifying event that was a reduction of hours that occurred at any time from September 1, 2008 through May 31, 2010 is also a qualifying event for purposes of eligibility.) This subsidy is not available to workers whose income in the year they receive the subsidy exceeds $125,000 for individuals and $250,000 for couples filing joint tax returns. This subsidy is also not available to those individuals eligible for Medicare and those individuals eligible for coverage under any other group health plan, such as a plan sponsored by a successor employer or a spouse’s employer. Generally, this does not include coverage for only dental, vision, counseling, or referral services; coverage under a health flexible spending arrangement; or treatment that is furnished in an on-site medical facility maintained by the employer.
NOTE: >If an individual takes advantage of the subsidy and in the same year exceeds the income limit, he or she must repay the subsidy.
Under COBRA, Employers are required to send forms to former employees so that former employees can elect to continue their group coverage and receive the subsidy. Former employees will have 60 days after receiving the forms to enroll. Further details about enrollment will be provided by the U.S. Department of Labor. For the most up-to-date information, contact the U.S. Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html). Does the New Law, Including the Subsidy, Apply to Group Continuation Coverage other than COBRA?
Under Georgia State Group Health Continuation, state group health continuation coverage must generally be elected and its premium paid within 60 days of termination and notice of ability to continue coverage. However, assistance eligible individuals that exhausted their 9 month state continuation coverage period prior to the May 20, 2010 extension from 9 to 15 months must pay premiums due no later than 30 days following notice of the right to extended state continuation coverage.
The new law, including the subsidy, applies to both federal COBRA group continuation coverage for employers with 20 or more employees and comparable state group health continuation coverage for employers irrespective of number of employees. When Will Eligible Individuals First Receive the Subsidy?
The subsidy will be applied to premiums for the first period of coverage beginning March 1, 2009. The law does not subsidize group continuation coverage prior to March 1, 2009. How will the Subsidy be Applied to Group Continuation Coverage?
NOTE: Eligible Individuals who have already paid premiums for coverage past March 1, 2009 are entitled to a refund or credit from their employer/insurer for the subsidy amount.
Former employees who qualify for the subsidy will only be required to pay 35% of the group coverage continuation premium. The former employer (in the COBRA continuation coverage context) or insurer (in the state continuation coverage context) initially pays the remaining 65%, but the government will later reimburse the employer or the insurer through a reduction in payroll taxes. Former employees will not be required to pay the full group coverage continuation premium and then seek a refund. Will Eligible Individuals Who Previously Terminated or Declined to Elect Group Continuation Coverage Have Another Opportunity to Elect Group Continuation Coverage and Receive the Subsidy?
Yes, in some cases. For instance, individuals that experienced a reduction of hours during the period that begins with September 1, 2008 and ends with May 31, 2010, followed by an involuntary termination of employment on or after March 2, 2010 and by May 31, 2010, then the involuntary termination will constitute a qualifying event entitling such individuals to a new election period. (See the separate A. For COBRA eligible persons or B. For State Continuation eligible persons.)
A. For COBRA eligible persons:
Under the new election period, COBRA coverage and the 15 months maximum of subsidy must be available starting with the first period of coverage that begins after March 2, 2010. However, the 18 months of COBRA is calculated based upon the initial qualifying event (i.e., the reduction of hours of employment resulting in the loss of coverage or the date of the loss of coverage). Under the federal law there is no requirement for a COBRA payment to be made during the period between the reduction of hours and the termination of employment. When providing coverage to former employees who elect COBRA group continuation coverage during the extended election period, employers may not apply preexisting condition coverage limitations based on a gap in coverage between the layoff and commencement of the group continuation coverage.
B. For State Continuation eligible persons:
If an eligible individual’s employment was involuntarily terminated between September 1, 2008 and May 31, 2010 and he or she declined, elected, and exhausted, or partially exhausted the applicable state continuation coverage period, the former employer’s insurer must notify him or her (using the individual’s last known address) of an additional opportunity to elect state group health continuation coverage (or the remainder of a newly lengthened 15 total month period of state continuation coverage) and receive the subsidy for any period after March 1, 2009. Coverage for eligible individuals who enroll during the Georgia state group health continuation second election period will:
• Begin as early as March 1, 2009.
• End no later than 15 months from the effective date of the continuation coverage beginning on or after the second election continuation coverage, or when 15 total, combined months of state continuation coverage have elapsed for persons who may have elected state continuation originally, exhausted 3 months or less and dropped that continuation coverage.
NOTE: The premium subsidy is available (for either COBRA or State Continuation Coverage) starting March 1, 2009 and applies only to coverage purchased on or after that date. The subsidy is not retroactive to periods prior to March 1, 2009.
What if an Employer Refuses to Provide Group Continuation Coverage or Refuses to Provide the Subsidy?
Under COBRA, the new law requires the U.S. Department of Labor to provide an expedited review of any employer’s refusal to allow a worker to elect group continuation coverage and receive the subsidy. Once the denied individual submits an application for review, the Department of Labor shall make an eligibility determination within 15 business days. If you have additional questions about these reviews, contact the U.S. Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html). (http://www.dol.gov/ebsa/COBRA.html). Does the New Law Extend the Length of Available Group Continuation Coverage?
The new federal law does not change the length of time that group continuation coverage must be provided to eligible individuals: COBRA typically provides for up to 18 months of coverage. The new Georgia state continuation law as applicable to assistance eligible individuals does extend the former length of state continuation coverage, in that it provides for the fractional month of employee’s termination plus up to 15 months of coverage (rather than the historical Georgia state group health continuation coverage limit of 3 months). Will Individuals be Eligible for the Subsidy for as Long as They Are Eligible for Group Continuation Coverage?
No, the subsidy will not necessarily last as long as an individual’s federal group continuation coverage. For example, former employees typically qualify for up to 18 months of COBRA coverage. The subsidy lasts up to 15 months. Therefore, an eligible individual who elects subsidized federal COBRA coverage after March 1, 2009 would still have to pay 15 months of unsubsidized premiums if he or she continues for COBRA’s normal 18 month term. For Georgia State Continuation, state law allows up to 15 months of continuation coverage for assistance eligible individuals which may match the federal subsidy available more closely than in the federal COBRA instance, because federal COBRA’s natural length is 18 months, rather than the state’s continuation coverage maximum of 15 months. Can an Individual Lose Eligibility for the Group Continuation Subsidy?
An individual can lose eligibility for the group continuation subsidy in two ways. First, as mentioned above, the Georgia state continuation subsidy lasts no longer than a total of 15 months. Second, an individual will become ineligible for the subsidy when he or she becomes eligible for new group health coverage or Medicare. Does the Subsidy Affect Eligibility for other Income-Based Government Programs?
• Beneficiaries must notify their former employer when they become eligible for new group health coverage.
• Beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110% of the subsidy to the federal government. No such penalty shall be imposed if the beneficiary demonstrates "reasonable cause" for the failure.
NOTE: Rules governing eligibility for subsidized COBRA differ from rules governing eligibility for unsubsidized COBRA. Eligibility for unsubsidized COBRA ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the COBRA subsidy.
The subsidy will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program. Does the New Law Affect Individuals Who Qualify for COBRA Due to Eligibility for Trade Adjustment Assistance or Eligibility for Benefits from the Pension Benefit Guaranty Corporation?
The new law provides significant extensions of COBRA coverage periods for individuals who receive benefits directly from the Pension Benefit Guaranty Corporation or are eligible for Trade Adjustment Assistance. If you have additional questions about these extensions, contact the U.S. Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html).
Variables and Unusual Situations
There are many variables potentially involved in determinations of an individual’s eligibility, including second election eligibility, under ARRA and Georgia Law, including:
1. Variability of date of an employee’s employment termination in the “window” of time between September 1, 2008 and May 31, 2010;
2. The number of days of fractional month of group health coverage in the month of the employee’s termination;
3. The day of the month of an employer’s monthly group health renewal;
4. A consumer’s election of state group health continuation and the date it started;
5. A consumer’s partial exhaustion of state continuation;
6. A consumer’s complete exhaustion of their original state continuation election; and
7. The potential for other factors not anticipated or described above,
All of the variable factors (and how they might relate to a particular consumer’s situation) were not necessarily anticipated in the express language of Senate Bill 94 in 2009 or in House Bill 1268 in 2010. The Office of Commissioner of Insurance will work with consumers and insurers to gather these relevant dates and other variables and offer interpretive guidance and direction to consumers, employers and insurers in these situations based on that particular combination of dates and other variables that apply to a consumer’s situation.
For More Information
Please call the Office of Commissioner of Insurance, Consumer Services Division at (800) 656-2298 or (404) 656-2070 or visit our website at http://www.oci.ga.gov