Joan Fusco, Director of Research and Education and our resident Information Specialist, oversees Savoy Associates Insurance Education Services, our Continuing Education school.  In this area of expertise, Joan is entrusted with providing vital information to our personnel and broker partners.  She frequently researches new legislation and gathers information at appropriate legislative and regulatory meetings.

Joan is a chief contributor to the Savoy Associates Knowledge Base for Quick Flash News articles, Frequently Asked Questions, and Regional Reference Guides for NY, NJ, and PA.  She is also a valued member of the Website Development Committee at Savoy Associates, which continually seeks to enhance the resources and functionality of our website.

In addition to all of her great work for Savoy Associates, Joan has recently been appointed by NJ Department of Banking and Insurance (NJDOBI) Commissioner Neil Jasey to serve on the Commissioner’s Advisory Board on Life and Health (2010) as a representative of the NJ Association of Health Underwriters.  Joan has received this accolade as a result of her constant involvement and outstanding efforts.

In this edition of Experts' Corner, Joan Fusco addresses some of the most common questions she hears from our producers regarding the COBRA Premium Assistance Extension of ARRA with the 2010 DOD Act.

If you have a specific question for Joan, please send it to her at joanfusco@savoyassociates.com.

Savoy Associates will continue to provide further details and clarification as information becomes available. Click HERE to view our most recent Quick Flash News posting, which includes highlights of the extensions.

How was the Premium Assistance under ARRA expanded or changed?

Late Thursday, April 15, 2010, President Obama signed into law, H.R. 4851, the Continuing Extension Act of 2010.

The law provides an extension on the eligibility for the COBRA health insurance 65% subsidy for people who have lost their jobs through May 31, 2010. The law also provides transition relief for individuals who lost their jobs between March 31, 2010, and the date of enactment.

On December 19, 2009, President Obama signed the Department of Defense Appropriation Act, 2010 (2010 DOD Act), which extends COBRA and State Premium Assistance of the American Recovery and Reinvestment Act of 2009 (ARRA). The act extends the eligibility period for the COBRA premium reduction through February 28, 2010 (an additional two months), and the maximum period for receiving the subsidy to 15 months. Previously, the maximum period was nine months.

On March 2, 2010, President Obama signed the Temporary Extension Act of 2010 (H.R. 4691) which extends the eligibility period for the COBRA premium reduction through March 31, 2010 (one additional month).

Please note the following highlights of the extensions:

• The subsidy was extended from nine (9) to 15 months.
• The extension is not automatic for persons who dropped Federal COBRA or NJ State Continuation. It is only automatic for those on Federal COBRA who continued beyond the nine months.

Who is eligible for the subsidy?

For persons subject to Federal COBRA (see FAQ section for details), each Qualified Beneficiary (QB) has the right to elect continuation.  If the event is an Involuntary Termination, each QB is eligible for the subsidy.

Example 1:  Mary is the employee.  Mary has family coverage.  Mary is involuntarily terminated.  If she does not elect continuation, her family can elect and receive a subsidy.

Example 2:  Mary’s spouse is eligible for Medicare.  He may elect continuation but will not be subsidy eligible.  Typically, he will pay the full single rate of the plan.

Who qualifies for the subsidy as an Assistance Eligible Individual (AEI)?

An Assistance Eligible Individual (AEI) must be a Qualified Beneficiary. Thus, the subsidy applies to those:

• Who had elected COBRA, exhausted the nine months and terminated coverage,
• Are currently on COBRA,
• Are pending coverage, or
• Who have Qualifying Event (QE) dates going forward through May 31, 2010.

• A spouse or dependent child other than a newborn added during open enrollment (A Qualified Beneficiary is someone covered the day of the Qualifying Event.)
• A Domestic Partner or Civil Union Partner
• An individual whose income exceeds $145,000

• With NJ State Continuation, only newly acquired dependents may be added after the Qualifying Event.
• Persons whose subsidy exhausted on 11-30-09 and who purchased an individual plan will be able to have that plan retroactively terminated.

Please explain the change regarding the termination versus COBRA eligibility date and eligibility for the subsidy.

The change in the timing of COBRA eligibility addresses the problem of extending active coverage in certain situations.

Example: Employee is involuntarily terminated 11-15-09 but will not lose plan coverage for six months or until 5-30-10 with COBRA treated as starting 6-1-10.  The employee is eligible for 15 months of subsidy because the termination occurred in the window (prior to 2-28-10).

Note:

• This change is also retroactive.
• NJ State Continuation begins the day after termination.

What is the premium?

• AEI pays 35% of what the employer charges as the COBRA premium, which cannot be paid by the employer. For example, the employer charges 50% of what the carrier charges as the COBRA premium. AEI pays 35% of this 50%.
• Employer is reimbursed via payroll taxes (line 12 of Form 941).
• 65% is subsidized by the employer under Federal COBRA and the carrier for State Continuation.
• There is no subsidy until the AEI pays 35% of what the plan charges.
• Coverage is only available retroactive to the termination date. Qualified Beneficiaries may not elect a more current date thereby having a break in coverage.

How is Involuntary Termination defined?

• A severance due to the authority of the employer, other than the employee’s explicit request (e.g., poor performance, layoff or fired).
• Reduction of hours is not an Involuntary Termination. However, the employee’s resulting termination may be an Involuntary Termination. (This will change if the pending second extension is passed and signed.)
• Retirement is not an Involuntary Termination. However, if absent retirement the employer would have terminated the employee, it is an Involuntary Termination.
• Involuntary Termination is not “I quit”, death, divorce, or aging out.

May the continuee elect a Plan of Lesser Premium?

Yes, under the original Premium Assistance under ARRA:

• For groups subject to Federal COBRA, the employer may permit a change to a plan of the same or lesser premium. Election must take place within 90 days of AEI being notified. “Lesser Plan” excludes standalone dental, vision, and HRAs. NY is handling the same for NY Mini-COBRA.
• The plan must be available to all active employees.
• NJ mandates that this be permitted during the 30 day election period (payment is due 30 days thereafter). For NJ State Continuation, see SEH Bulletin 09-02 in our Forms, Benefit Summaries, and Supplies section or on www.njdobi.org.

• Subsidy maximum is 15 months per event, not lifetime.
• Excludes health Flexible Spending Accounts (FSAs).

When is the individual no longer eligible for the subsidy?

• When the AEI becomes eligible for any other group health plan regardless of cost. Individuals in the new employer’s waiting period are not “eligible” for the plan and as such may remain on the subsidy.
• Eligible for Medicare.
• 18 months from the actual termination date has expired.

Are there new COBRA and State Continuation Notices?

Yes. Please use the following model notices. You should not create your own notices.

• Federal COBRA Model Notices (Employers / Plan Administrators provide): http://www.dol.gov/ebsa/COBRAmodelnotice.html
• NJ State Continuation Model Notice (Carrier provides): http://www.state.nj.us/dobi/division_insurance/ihcseh/bulletins/10seh01.pdf
  • The employer must still send a notice regarding the amount that 35% represents for newly terminated employees.
  • Carriers will send the Premium Assistance Extension notice directly to the AEI who exhausted the nine months and continued or terminated. The AEI must respond directly back to the carrier to elect the extension.
  • There is a $110 per day penalty for not sending notices.

Is it true that there is further pending legislation to extend the subsidy?

Yes. It is expected that further legislation will extend assistance to terminations through all of 2010.

Where should appeals for denial of coverage or subsidy be sent?

• Federal COBRA: U.S. Department of Labor (DOL) www.dol.gov/COBRA or Employee Benefits Security Administration (EBSA) at 866-444-3272
• For State Continuation, the right to appeal the denial of the subsidy is through the U.S. Department of Health and Human Services (HHS), which is working on the process for an appeal and an appeal form.
• NJ State Continuation - NJ Department of Labor and Workforce Development, Division of Wage and Hour Compliance, in writing at P.O. Box 389, Trenton, NJ 08625-0389, by telephone at (609) 292-1704 or via email at wage.hour@dol.state.nj.us.
• NY COBRA: NY State Insurance Department by telephone at (800)342-3736 or see the NY State Insurance Department's website at www.ins.state.ny.us.

For further information, please visit the following pages on our website:

Savoy Associates Frequently Asked Questions (FAQs) for COBRA (Federal)

Quick Flash News posted January 6, 2010

Read Joan Fusco's professional biography.