The IRS reports that recently enacted legislation will extend the eligibility period and the maximum duration of COBRA premium assistance for several more months. The American Recovery and Reinvestment Act of 2009 allowed eligible individuals a nine-month subsidy on their COBRA health insurance premiums. The Department of Defense Appropriations Act 2010 enacted on December 19 extended the eligibility period and the maximum duration of COBRA premium assistance.
As a result, workers who are involuntarily terminated from employment between September 1, 2008 and February 28, 2010, may be eligible to pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months. This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.
The administrator of a group health plan or other entity must notify certain assistance-eligible individuals of the extension by Feb. 17, 2010. For assistance-eligible individuals whose nine months of subsidy had already ended, the new law also provides an extended period for the retroactive payment of their 35 percent share during a transition period.
There is much more information about the COBRA subsidy, including a question and answer area on the COBRA pages of IRS.gov
COBRA gives workers and their families who lose their health benefits the right to purchase group health coverage provided by the plan under certain circumstances. If the employer continues to offer a group health plan, the employee and his/her family can retain their group health coverage for up to 18 months by paying group rates. The COBRA premium may be higher than what the individual was paying while employed but generally the cost is lower than that for private, individual health insurance coverage. The plan administrator must notify affected employees of their right to elect COBRA. The employee and his/her family each have 60 days to elect the COBRA coverage; otherwise, they lose all rights to COBRA benefits. COBRA generally does not apply to plans sponsored by employers with fewer than 20 employees. Many States have similar requirements for insurance companies that provide coverage to small employers. The premium reduction is available for insurers covered by these State laws.