The American Recovery and Reinvestment Act
As you are aware, President Obama recently signed into law a $790 billion economic stimulus package – the American Recovery and Reinvestment Act. This plan combines $281 billion in tax cuts with $311 billion in programs funded by appropriation committees and $193 billion for benefits programs.
I would like to take this opportunity to provide you information on how this Law will impact your healthcare benefits and more specifically the effects of the COBRA provisions.
COBRA Components
This plan includes provisions to help eligible jobless workers pay for health insurance under COBRA. Available to employers with 20 or more employees, COBRA allows newly unemployed workers to keep health insurance provided by their former employers. Traditionally, these premiums are prohibitively expensive.
Components include:
• Premium Reduction/Subsidy: For workers who were involuntarily terminated between September 1, 2008 and December 31, 2009, the government will subsidize 65% of their premiums under COBRA for nine months. This subsidy also applies to healthcare continuation coverage if required by the state.
• Special Election Period: For workers who were involuntarily terminated between September 1, 2008 and the day the stimulus Law goes into effect, and who did not sign up for COBRA, will get an additional 60 days to do so and receive the subsidy.
• New Notification Period: Within 60 days of enactment, the Employer or COBRA Administrator shall provide an additional notification to any Assistance Eligible Employee who became entitled to elect COBRA before enactment of this Law.
• Tax Credit for Employers: To offset the employer’s expense, the employer may take a full tax credit for its expenditures out of its payroll taxes including both income tax withholding and FICA.
• High Income Exclusion: If the modified adjusted gross income (AGI) of a participant exceeds $125,000 a year, or a family’s AGI exceeds $250,000, their income tax will be raised by the premium reduction amount – effectively removing the subsidy.
• Plan Enrollment Option: Qualified Beneficiaries (QBs) under the stimulus will have the option to change plans to another product offered by the Employer with the following requirements:
o Employer agrees to allow QBs to enroll in different coverage
o The selected plan does not exceed the premium for coverage in which the individual was enrolled at the time the qualifying event occurred
o Plan cannot be Dental, Vision, Counseling, Referral or FSA
o Coverage is also offered to active employees
Impacts on Your COBRA Compliance
This Law will have a direct impact on your company with regard to the administration of your healthcare benefits. In compliance with the Law, you will be required to:
• Send a notice to involuntarily terminated employees since September 1, 2008 with a description of their rights and obligations regarding the subsidy.
• Update all COBRA forms and enrollment materials to reflect the changes.
• Or, if you currently work with a COBRA Administrator, coordinate with the Administrator to send notices and update forms.
• Take a full tax credit out of your payroll taxes for your expenditures associated with the subsidy.
As you navigate your way through these legislative changes, if I can be of assistance to you in any way please do not hesitate to call. For those of you not already working with a COBRA Administrator, I can provide recommendations and walk you through your options.
To learn more about Florida group health insurance, Tampa group health insurance, Sarasota group health insurance, Miami group health insurance, or Orlando group health insurance, visit Grouphealthflorida.com or call 1-800-873-5713.
