Consolidated Omnibus Budget Reconciliation Act - Provision under the American Recovery and Reinvestment Act of 2009
1. Consolidated Omnibus Budget Reconciliation Act:Provision under the American Recovery and Reinvestment Act of 2009 Casey Enevoldsen Human Resources Intern Chippewa County-Montevideo Hospital (CCMH) August 2009
3. Purpose To obtain a basic understanding of COBRA and the new provision set forth by the American Recovery and Reinvestment Act of 2009 (ARRA).
4. Overview of COBRA What is COBRA? “The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.” United States Department of Labor, "Continuation of Health Coverage - COBRA". United States Department of Labor. August 10, 2009 <http://www.dol.gov/dol/topic/health-plans/cobra.htm>.
5. Overview of COBRA (cont.) Who is eligible for COBRA? Employees who voluntarily or involuntarily terminate their employment for reasons other than gross misconduct. Reduced hours of work that would cause the employee to lose health benefits. The covered employee becoming eligible for Medicare. An individual who becomes divorced or legally separated from the covered employee. Death of a covered employee (family can continue coverage under COBRA). The loss of status of a dependent child under plan rules. **First two bullets are eligible for up to 18 months of continued health benefits under COBRA. Last four bullets are eligible for up to 36 months of continued health benefits under COBRA.
6. Overview of COBRA (cont.) What is the cost of health coverage under COBRA? If the individual elects COBRA continuation coverage, that individual could be responsible for up to 102% of the cost of the plan. 100% of the total premium + 2% administration fee.
7. Overview of COBRA (cont.) How long does an individual have to elect COBRA? Employer, Plan, or Insurer has 14 days after the termination date to send an election notice. Individuals have 60 days after they have received an election notice from the plan administrator to elect heath care coverage under COBRA.
8. Provision under the ARRA:Assistant Eligible Individual (AEI) Allows individuals, who are qualified beneficiaries, to pay only 35% of the total cost of their current health plan under COBRA. Individuals can take advantage of the AEI program until the earliest of: 9 months of utilization; Becoming eligible under another group health plan or Medicare; or Reach their COBRA continuation coverage expiration date. The remaining 65% of the total premium cost is reimbursed through a payroll tax credit to the employer, plan, or insurer. **Employer, Plan, or Insurer will be reimbursed quarterly by filing an IRS Form 941. This premium subsidy includes any administrative fees that could be associated with COBRA. For example, if an individual was paying 102% of the total cost of the premium, an AEI would only be responsible for paying 35% of the 102% cost.
9. Qualified Beneficiary Must have lost their health coverage as the result of an involuntary termination between September 1, 2008 and December 31, 2009; Are eligible for COBRA continuation coverage at any time during the period; Elect COBRA coverage. Qualified Beneficiaries include: Employee; Spouse of the employee; Dependent child of the employee.
10. What Constitutes Involuntary Termination? The Internal Revenue Service (IRS) defines an involuntary termination as follows: Termination from employment indefinitely Layoff Reduction in hours
11. Scenario Lindsey, an RN at CCMH, had a reduction in hours on February 23, 2009, which makes her ineligible for health coverage. Kristen, Lindsey’s domestic partner, and Kayla, their dependent child, were covered under Lindsey’s health insurance prior to February 23. Is Lindsey, Kristen, and Kayla eligible for COBRA continuation coverage? If so, would they be eligible for AEI? Why?
12. ScenarioSolution Yes, all three are eligible for COBRA continuation coverage. However, Kristen is not eligible to elect COBRA for herself. Only Lindsey and Kayla are legally able to elect COBRA coverage because only Lindsey and Kayla are considered qualified beneficiaries. Lindsey may elect COBRA coverage on behalf of Kristen. Lindsey and Kayla are eligible for AEI, however Kristen is not because she is not consider a qualified beneficiary. To figure out how much Lindsey would be responsible to pay for COBRA continuation coverage, we must use a incremental cost approach. Example: Lindsey takes out a Family Plan under COBRA to cover all three family members. Family Plan: $1,000 Only Employee + 1 Plan would be eligible for AEI. Lindsey would pay Employee + 1: $800 only 35 % of $800 and she would then be responsible for the remaining Employee: $450 $200 to have Kristen covered under COBRA.
13. Denials of the AEI Program If an individual is denied as an AEI, he/she can request an expedited review by the Department of Labor (DOL) or the Department of Health and Human Services (HHS). DOL – process expedited reviews received from organizations not regulated by ERISA. HHS – process expedited reviews received from organizations that are regulated by ERISA. Legally obligated to make a determination within 15 business days upon receipt of the completed expedited review.
14. Overpayment of COBRA Premiums If an individual has over paid on their premium costs there are two ways an individual can be reimbursed. The employer, plan, or insurer can put the amount that the individual over paid towards future premium costs, if the total amount the individual overpaid is completely reimbursed within 180 days. If the total amount cannot be fully reimbursed in 180 days, the individual must be reimbursed within 60 days from the employer, plan, or insurer.
15. Income Limits under AEI While the individual is receiving the COBRA premium subsidy, that individual is restricted on how much they are able to earn within that particular year. Earn more than $145,000 ($290,000 for joint filers) Must pay a 110% penalty tax that is based upon the total amount that individual received in a premium subsidy. Earn between $125,000-$145,000 ($250,000-$290,000 for joint filers) Must pay the total amount the individual received in a premium subsidy.
16. Responsibilities of the Employer As of February 17, 2009, the Plan Administrator had 60 days to notify all qualifying individuals that they were eligible for AEI and the special COBRA election opportunity. Types of Notifications: General Notice Abbreviated General Notice Alternative Notice Extended Election Period Notice **For further explanation refer to the comparison chart located on the next slide. Switching Benefit Options Employer not obligated Benefit Option must be of equal or lesser value.
17. *Information included in this chart was taken from the U.S. Department of Labor United States Department of Labor, "Notices". United States Department of Labor. August 11, 2009 <http://www.dol.gov/ebsa/COBRAmodelnotice.html>. Employee Notification Comparison Chart
18. Responsibilities of the Employee Elect COBRA continuation coverage within 60 days of an election notice from the Plan Administrator. Obligated to inform their Plan Administrator if they are/become eligible for health coverage under a spouses plan or through Medicare. Understand that their gross income during the year they receive ARRA is restricted.
20. References United States Department of Labor, "Fact Sheet: Consolidated Omnibus Budget Reconciliation Act (COBRA)". U.S. Department of Labor. August 11, 2009 <http://www.dol.gov/ebsa/pdf/fsCOBRA.pdf>. United States Department of Labor, "Continuation of Health Coverage - COBRA". United States Department of Labor. August 11, 2009 <http://www.dol.gov/dol/topic/health-plans/cobra.htm>. Employee Benefits Security Administration, "Fact Sheet: COBRA Premium Reduction". United States Department of Labor. August 11, 2009 <http://www.dol.gov/ebsa/pdf/fsCOBRApremiumreduction.pdf>. United States Department of Labor, "Notices". United States Department of Labor. August 11, 2009 <http://www.dol.gov/ebsa/COBRAmodelnotice.html>. Employee Benefits Security Administration, COBRA Provisions in the American Recovery and Reinvestment Act of 2009 Compliance Assistance Webcast. United States Department of Labor. August 11, 2009 <http://w.on24.com/r.htm?e=139337&s=1&k=3A818D91BC18D31F024968D47757389D>.
