COBRA American Recovery and Reinvestment Act (ARRA)

Under the American Recovery and Reinvestment Act of 2009 (ARRA) a 65% reduction in COBRA premiums is provided for eligible persons for up to 9 months. Although the law went into effect February 17, 2009, regulations continue to be written and updates will follow.

To be eligible for the new COBRA allowances, an employee must have been eligible for COBRA continuation coverage any time between Sept. 1, 2008 and Dec. 31, 2009. Second, the employee must have elected COBRA coverage during the election period. Third, the employee must have a qualifying event for COBRA coverage such as the employee was involuntary terminated during the above time period. The employee must be laid off or fired and not voluntarily resign. Finally, only employers with 20 or more employees on group insurance plans must offer these provisions.

The COBRA subsidy, being one of the most noted parts of the American Recovery and Reinvestment Act (ARRA), allows the employee to pay just 35% of the usual COBRA premium. Employees that lose healthcare coverage due to employment termination will qualify for a 65% subsidy on continued group insurance coverage under the new COBRA regulations. For example: If a terminated, past employee of a company, when employed paid $800.00 for COBRA coverage, now under the ARRA subsidy, they would now pay just $280 and the employer would pay the remaining 65% of the premium or $520.

Under the ARRA, employers pay the healthcare premiums to the insurance company and the employer can deduct the 65% of the premium from payroll taxes. Labor Law Compliance Center carries a complete line of official COBRA postings in an effort to assist you in displaying this information to your employees.

Additional information may be obtained from the Department of Labor at http://www.dol.gov/ebsa/cobra.html.