In February 2009, President Obama signed The American Recovery and Reinvestment Act of 2009 (ARRA), which included changes to health insurance benefit provisions under COBRA. Under the ARRA, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are only required to pay 35% of the cost of COBRA coverage. Employers must treat the 35% payment by eligible former employees as full payment, and in return the employers are entitled to a credit for the other 65% of the COBRA cost on their payroll tax return.

Originally, the federal government’s reduction of health insurance premiums was to last nine months for covered workers who were involuntarily terminated on or before December 31, 2009. Last month, the ARRA was amended to extend health insurance premium assistance to eligible employees for up to 15 months, and to those who were involuntarily terminated on or before February 28, 2010.

In Minnesota, qualified individuals can file for the Minnesota COBRA Premium Subsidy program, where the State will pay the 35% cost of the COBRA coverage to the individual’s former employer. It is being reported the Minnesota House is intending to make a proposal extending the benefits under the Minnesota COBRA Premium Subsidy Program during the upcoming legislative session.

What do employers need to do?

  • Update your COBRA notices (General – rtf) (Alternative – rtf) to reflect the accurate eligibility period for use in any involuntary terminations between now and February 28, 2010.
  • Notify employees who were involuntarily terminated after September 1, 2008, and are or were receiving premium assistance, of these changes (rtf), so they may determine if the extension applies to them.