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November 2009 Question of the Quarter

Will the COBRA Subsidy Program be extended?  

The Obama administration is considering whether it should extend the COBRA subsidy program that was created as part of the economic stimulus bill that went into effect earlier in 2009. This allows an employee who was involuntarily terminated from their employment (other than for gross misconduct) to pay only 35% of their COBRA premium for up to nine months (subject to early terminations rules). The remaining 65% is offset by the federal government.

At this time, it is unclear what component of the subsidy program would be extended, but below are a few of the ideas that are being contemplated:

1. Congress could allocate some of the remaining stimulus money to allow current COBRA participants to continue to be eligible for the subsidy for longer than nine months. The maximum COBRA coverage periods would still remain in effect. Meaning, that if an individual is eligible for 18-months of COBRA coverage, that individual would still only be eligible for 18-months of COBRA coverage, but would be able to subsidize their COBRA premiums for longer than the initial nine months provided for under the economic stimulus bill.
2. Congress could leave the nine months in place, but extend the December 31, 2009 termination date in which one qualifies for the subsidy. In order to be eligible for the initial subsidy, the employee must have been involuntarily terminated between September 1, 2008 and December 31, 2009. If the December 31, 2009 date is extended, this would result in individuals who are involuntarily terminated during 2010 (for reasons other than gross misconduct) to be eligible for the subsidized COBRA rate.
3. A combination of options one and two above.

Unemployment remains over 10% in most states and individuals continue to be out of work longer than at any time in recent history. As you plan for the upcoming New Year, keep the above in mind. Meritain Health will continue to follow this matter and will keep you informed as we learn more.

For additional information on the COBRA Subsidy Program and ARRA, please click here to listen to our latest podcast.