Currently, we at Igoe are preparing our systems and staff in order to adapt to the many required changes brought by ARRA. The law gives administrators sixty (60) days to comply with a variety of new requirements. We are committed to providing the most up-to-date information to all our COBRA qualified beneficiaries as quickly as possible.

ARRA requires the Department of Labor (DOL) to draft and release a model notice within 30 days of ARRA’s enactment. This notice is to be used to notify all Assistance Eligible Individuals (AEIs) of their rights under this Bill. Until this notice is available, we are unable to provide specific time frames as to when you should be receiving written communication from us regarding ARRA.

We understand you have many questions about ARRA and how it may affect you. Our Member Services Representatives are providing you professional, personable assistance to their fullest capacity on the phone and via e-mail. Remember, our access to answers is limited at this time, so please be patient. We will release additional details about the law and what it means for you as soon as they are available.

For your convenience, we have outlined a summary of ARRA and a number of frequently asked questions below that may help to address your concerns prior to contacting us directly. Further inquiries can be directed to our COBRA team:

For COBRA participants
Phone- (800) 633-8818, option 2
E-mail- cobra@goigoe.com.

For COBRA Clients
Phone- (800) 633-8818, option 4
Email- iCOBRAteam@goigoe.com

If you are unable to reach a live Representative on the phone, please leave us a detailed message and we will return your call within one (1) business day.

The American Recovery and Reinvestment Act of 2009 (the “Act”) was signed into law February 17, 2009. The law has a final price tag of $787 billion and combines tax cuts aimed at stimulating the economy right away, with longer term government spending on public works projects in the health care, energy and technology sectors. Title III of ARRA places new requirements on employers and administrators for the provision of continued health coverage at a subsidized rate for certain qualifying individuals. Below are some of the key takeaways of this provision:

• A COBRA subsidy equal to 65% of the applicable premium will be available for up to 9 months to individuals who lost their jobs through involuntary termination between September 1, 2008 and December 31, 2009. The legal term of art for this group is "assistance eligible individuals." Basically, this group pays reduced COBRA premiums and the plan sponsor subsidizes the remainder of the full premium amount.
• The Act does not define “involuntary termination” - presumably it would include employer-initiated termination of employment for any reason short of “gross misconduct” which can be a disqualifier for COBRA coverage under existing law.
• The premium subsidy is phased out for individuals earning above $125,000 and couples filing jointly and earning above $250,000, in the year in which the subsidy is received. The subsidy phases out completely at $145,000 for individuals and $290,000 for couples filing jointly. Because the phase out applies based on income for the same year in which the subsidy is received, it is structured as a repayment obligation - specifically, an increase in the individual’s or couple’s income taxes for the applicable year. Those who are subject to repayment obligations for part of the 9 months could still qualify for the full subsidy for the remainder of the period should their income drop below the minimum threshold for that time period; i.e., if the COBRA period bridges two calendar years. The bill also includes a waiver option for those who are certain they would be subject to a full or partial repayment obligation.
• Subsidized coverage is not retroactive, though people who lost their job in September 2008 and started COBRA in October 2008 are normally COBRA-eligible for 18 months - through January 2010 - so they should be able to enjoy a full 9 months of subsidized benefits.
• Note that the subsidy is not available for people who become eligible for COBRA for any reason other than involuntary termination, such as through divorce. The subsidy also stops if the recipient secures employment that offers alternative coverage, or becomes eligible for Medicare benefits. COBRA recipients are required to notify their employer or insurer of such events and a penalty of 110% of the premium reduction applies to those who do not timely comply.
• In most instances, the employer is eligible for reimbursement of the subsidy. Reimbursement will take the form of a credit against payroll taxes (FICA, employees' wage withholding) the premium recipient would otherwise pay with regard to its own employees. This means that an employer's payroll tax obligation for its own employees will be reduced to account for the reduced COBRA premiums it is collecting from the insureds’ former employees.
• If the COBRA subsidy amount exceeds applicable payroll taxes owed, the rest is reimbursed by the government in cash; Treasury Regulations will specify exactly how this will work.
• Reimbursement is only available once the subsidy has been provided. Employers and insurers may have to provide discounted COBRA coverage for some time before the government is ready to reimburse them.
• There will be an extended 60-day COBRA election period for "assistance eligible individuals" who have not elected COBRA at the time the stimulus bill passes. Late elected coverage will be retroactive to the date the stimulus bill is enacted but will not extend the total period of COBRA coverage available, measured from the date of job loss. For instance, if a covered employee lost her job on September 10, 2008 but did not elect COBRA coverage, she would have 60 days from the date of notification of the new election right to elect COBRA coverage at the subsidized rates. However, the COBRA coverage would not be required to last for 18 months, and instead would expire 18 months after September 10, 2008. The reenrollment right also extends to assistance eligible individuals who originally elected COBRA but dropped it because they were unable to afford the premiums.
• The availability of the premium subsidy must be explained in writing in new COBRA election materials provided to those who lose regular coverage before 2010 and to those who had a qualifying event on or after Sept. 1, 2008, whether or not they elected COBRA at that time. The Dept. of Labor will provide model notification language for this, and for the extended 60-day election period provided to those who already declined or dropped COBRA coverage.
• There are also provisions allowing an “assistance eligible individual” to select alternative coverage for the COBRA period, in lieu of maintaining the coverage they had at the time their employment ended. For instance, an individual who was enrolled in a PPO at the time they lost their job could select an HMO for the COBRA period to save additional costs, if the employer plan make an HMO option available. The HMO election will apply for the full COBRA period, even after the subsidy expires.
• Health flexible spending accounts offered under a Section 125 cafeteria plan are not eligible for the COBRA subsidy. (COBRA applies to Health FSAs only under limited circumstances, in any event.)

Igoe Administrative Services thanks Christine P. Roberts of Mullen & Henzell L.L.P. for her help preparing this summary.

Definitions
American Recovery and Reinvestment Act of 2009 (“ARRA”)
Assistance Eligible Individuals (“AEI”)
Qualified Beneficiary (“QB”)
Qualifying Event (“QE”)


What is ARRA?
The American Recovery and Reinvestment Act (“ARRA” or “the Act”) is a law enacted on February 17, 2009, in an effort to restore economic growth and provide assistance to millions of Americans. A portion of ARRA requires continuation coverage provided under COBRA be subsidized (discounted) for certain individuals and their eligible dependents.

What is the subsidy?
The subsidy under ARRA amounts to 65% of the COBRA premium (102% of the applicable monthly premium charged by the insurance carrier). This means that COBRA participants will only be responsible for 35% of the applicable premium for a period of time under the new law. The subsidy applies to medical, dental, vision, HRAs, and some EAP coverage. The subsidy does not apply to Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs).

When is the subsidy effective?
ARRA states that premium assistance should be made available for the first “period of coverage” beginning on or after February 17, 2009. Typically, group health plans provide coverage on a monthly basis. In these cases, the subsidy will begin on March 1, 2009, for AEIs eligible for COBRA on or before that date. Some plans provide coverage and charge premiums on a daily basis, in which case an AEI may receive premium assistance beginning as early as February 17, 2009.


Am I eligible for the subsidy?
If you are a QB and meet the following criteria, you are eligible under ARRA as an assistance eligible individual (“AEI”):

1. Your coverage under the active group health plan ended due to a qualifying event occurring on or between September 1, 2008, and December 31, 2009;
2. You make an election to continue coverage under COBRA; and
3. You experience a QE of involuntary termination of the covered employee’s employment during the period stated above.

QBs must have annual incomes of less than $125,000 for single filers and $250,000 for joint filers in order to qualify for the full subsidy. Individuals with annual incomes between $125,000 and $145,000 and couples with annual incomes between $250,000 and $290,000 may be eligible to receive a portion of the subsidy. QBs who participate in subsidized COBRA without truly being AEIs will be penalized up to 110% of the subsidy. Please consult your tax professional for guidance.

I am an AEI, but I never elected COBRA/have already been terminated from COBRA eligibility. Can I still enjoy the subsidy?
Yes. ARRA requires that all AEIs be notified of their eligibility for subsidized COBRA premiums regardless of their current COBRA status. If you are a QB and terminated eligibility prior to instatement of the ARRA, you will be given a new 60-day election period in which to enroll for subsidized COBRA coverage. Igoe Administrative Services will send you notification of your eligibility within the 60-day time frame required. Once elected, your COBRA coverage will begin on the first period of coverage available on or after February 17, 2009 (usually March 1, 2009). Standard prior coverage requirements under HIPAA will be waived for the time frame between the two periods of coverage.

When will I receive information about the subsidy and my potential eligibility for premium assistance? Igoe Administrative Services will be issuing notices to all applicable QBs within the time frames required under ARRA. Our systems are currently being updated to include the new notification and subsidy requirements. We are working as quickly as we can to communicate clear, accurate information to all COBRA participants.

I am an AEI and need to pay premiums for March (or a future month). Should I send in only 35% of my premium?
No. Please continue to send in the full premium amount until you are notified of your AEI status and the subsidized premium amount due. If you pay only 35% of your premium prior to receiving notification of your subsidized premiums due, your payment will be returned to you, unprocessed. You will not receive any extensions beyond the standard 30-day grace period to submit the full premium amount due.

I am an AEI and currently enrolled in COBRA and have already paid premiums for coverage effective March 1, 2009, going forward. Will I get a refund once the subsidy is applied to my account?
If you are an AEI and have already paid your March premium (or any future premium) at the full 102% rate, the subsidy will be applied to your account and any overpaid premiums will be automatically credited toward future months’ premiums. If the credits on your account pay for your portion of the subsidized premiums due for more than 6 months, you will be refunded the remainder of the overpaid premiums in the near future.

When will my premium assistance terminate?
Premium assistance is available to all AEIs for a maximum period of 9 months. If you are an AEI and become eligible for another group health plan, including Medicare, your AEI status will terminate and you will no longer be eligible to enjoy the subsidy. You must provide written notification to Igoe Administrative Services promptly of your change of status in order to avoid monetary penalties.


Who ends up paying for the subsidy?
The entity to which COBRA premiums are payable is eligible for reimbursement of the subsidy. In most cases, this entity is the employer. State continuation coverage is typically paid directly to the insurance carrier, in which case the carrier would file for reimbursement. Reimbursement will take the form of a credit against payroll taxes (FICA, employees' wage withholding) the premium recipient would otherwise pay with regard to its own employees. If the amount of eligible reimbursement exceeds the amount of payroll taxes, reimbursement will be issued in the form of a check from the Federal government (much like a yearly tax return).

What are the new notification requirements?
Employers are now required to notify AEIs of their eligibility for subsidized continuation coverage in addition to complying with all previous requirements under COBRA. The Department of Labor is scheduled to release model notification language within 30 days of the ARRA’s enactment. QBs eligible for COBRA prior to March 1, 2009, should be provided a separate notice in addition to the original qualifying event notice advising of their eligibility (or possible eligibility) for the subsidy and their right to make an election for prospective subsidized COBRA coverage within 60 days of the notification. QBs eligible for COBRA on or after March 1, 2009, can be provided one notice including their specific rights under COBRA in addition to their eligibility (or possible eligibility) for subsidized COBRA.