This second election period also applies to those individuals who elected COBRA coverage but have subsequently lost that coverage prior to the enactment date (e.g., due to non-payment of premiums).  If these AEIs elect COBRA continuation coverage, their coverage will extend back to the enactment date of the Act. However, the maximum COBRA eligibility period is measured from the original qualifying event date (i.e., the date of the involuntary termination of employment).

You will not be reimbursed for premiums paid before Feb. 17, 2009.

- Andrew is involuntarily terminated on September 1, 2008, and loses his active employee coverage as of September 30, 2008.

- He is mailed a COBRA election notice but fails to elect by the November 29, 2008 deadline.

- Within 60 days of the enactment date, Andrew must be offered another opportunity to elect COBRA.

- Andrew makes this election on March 15, 2009.

- Since his plan offers coverage month-to-month, his COBRA coverage will begin on March 1, 2009.

- However, his maximum COBRA eligibility period will still begin on October 1, 2008 (the day after his last date of active employee coverage) and run through March 31, 2010.

- Individuals with modified adjusted gross income that exceeds $250,000 (for joint return filers) or $125,000 (for all other filers) are not eligible for the full premium subsidy.  However, they may be eligible for a portion of the subsidy.

- Individuals earning between $125,000 and $145,000 (between $250,000 and $290,000 for joint return filers) will have their income tax increased by a percentage of their total COBRA subsidy received in that year.

- Individuals earning more than $145,000 ($290,000 for joint return filers) will have their income tax increased by the total amount of COBRA subsidy they receive.

Because any portion of a subsidy an individual receives but is not eligible for must be reported on the individual’s income tax return, employers and insurers may treat all AEIs as eligible for the subsidy regardless of their income level. However, these individuals have the right to waive the subsidy and pay the full COBRA premium required in order to avoid tax consequences.

As noted above, the federally provided COBRA subsidy is 65 percent of the amount owed by AEI.  A payment made by the AEI equal to 35 percent of the applicable premium is considered payment in full. The remainder must be paid by the employer, plan or insurer and will be subsequently reimbursed by the government through payroll tax credits.

• Bob’s total COBRA premium is $500 per month.

• Due to a severance agreement, Bob’s former employer subsidizes 50 percent of the premium, and Bob pays the remaining $250.

• Under the Act, Bob is an AEI, so he is eligible for the additional COBRA subsidy.

However, if an AEI becomes eligible for other group health coverage or Medicare, or reaches the end of his or her maximum COBRA coverage period, his or her entitlement to the subsidy ends.

- Any AEI who becomes eligible for other group health coverage or Medicare must provide timely written notice that he or she no longer qualifies for the COBRA subsidy.

- Failure to do so is punishable by a penalty equal to 110 percent of the subsidy received after becoming eligible for other coverage.

The Act allows employers to offer AEIs the option to change their health insurance coverage when making a COBRA election under the employer’s plan.

- This new coverage option must have the same or lower premiums and must be available to similarly situated non-COBRA employees under the plan.

- If the employer chooses to offer this option, an AEI must elect to change his or her coverage within 90 days of receipt of the COBRA election notice.

- This provision is optional and an employer is not required to make this option available.

The Act requires employers to modify their COBRA election notices or provide separate, supplemental notices to all individuals who become entitled to elect COBRA continuation coverage during the period beginning on September 1, 2008 and ending on December 31, 2009.

These notices must include all of the following:

- An explanation of the eligibility requirements for the COBRA subsidy

- The name, address and phone number of the plan administrator if the individual has questions or requires more information

- A description of the qualified beneficiary’s obligation to notify the plan if he or she becomes eligible for coverage under another group health plan or Medicare, and a description of the penalty for failure to notify the plan

- A description of the qualified beneficiary’s right to a reduced premium and any conditions on entitlement to the reduced premium

- A description of the election of different coverage option described above (if the employer chooses to offer this option to AEIs)  Those COBRA-qualified beneficiaries who were involuntarily terminated between September 1, 2008, and February 17, 2009, must be issued a revised notice including the information outlined above within 60 days of the enactment date. These notices must also describe the second 60-day COBRA election period and explicitly state that the maximum COBRA coverage period is still measured from the date of the original qualifying event.

The Act requires the Department of Labor, Treasury, and the Department of Health and Human Services to work together to provide a model notice within 30 days of the enactment date.  Because employers have a 60-day period in which to provide the revised notices, some employers may choose to wait until the model notices have been issued before revising their own notices.