Stimulus, Subsidy, Retro Coverage

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Stimulus, Subsidy, Retro Coverage COBRA
Compliance under the new Stimulus Act (ARRA)
HRS/TND Associates, Inc. Thomas N. Dondore,
SPHR Research by Sean Glasser, HRS COBRA
Administrator
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Thank you for attending

• This program is to provide basic educational
  information regarding the American Recovery and
  Reinvestment Act.
• We do not provide legal advice and you should
  consult others for same. (But we do know our
  COBRA!)
• This subject is in flux with enforcement agencies
  continually altering information.
• This is our best interpretation of the subject at
  this point in time.
• Our only consulting obligation is to engaged
  clients, not the general public.

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First, a History...

• COBRA initially passed in 1985
• DOL - authority to issue regulations regarding
  notices
• IRS - responsibility of issuing rules defining
  required continuation coverage

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Developing A Compliance Program
Maintaining Proper Compliance
Consistency In Applying Provisions
MANAGING COBRA
Establishing Company Philosophy
Sources For Updates
Updating COBRA Program
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20 OR MORE EMPLOYEES
Full-Time

Part-Time
Regardless Of Eligibility for the Group Health
Plan for at least ½ of previous year
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Initial/General Notice
Employer Qualifying Event Notice
FINAL COBRA NOTICE RULES (prior to ARRA)
Employee Qualifying Event Notice
Unavailability Notice
Election Notice
Notice of Early Termination
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Notice of Possible Subsidy Eligibility (4
versions)
Initial/General Notice ARRA
Employer Qualifying Event Notice
FINAL COBRA NOTICE RULES (after ARRA)
Employee Qualifying Event Notice
Unavailability Notice
Election Notice
Notice of Early Termination
Notice of End of Subsidy
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COBRA COVERAGE
APPLIES TO
DOES NOT APPLY TO
Medical
Life Insurance
Dental
Disability
Vision
HSAs
Prescription
Section 125 FSAs
HRAs, EAP
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SUBSIDY COBRA COVERAGE
APPLIES TO
DOES NOT APPLY TO
Medical
Life Insurance
Dental
Disability
Vision
HSAs and FSAs
Prescription
HRAs
EAP
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Event Loss Of Coverage

COBRA Qualifying Event
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ARRA QUALIFYING EVENTS

• Involuntary Termination of Employment (EMP
  Direction)
• ???Involuntary Reduction Of Hours (must lead to
  loss of benefit)????
• ????Constructive discharge, retirement package,
  Quit in anticipation of layoff??????

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QUALIFIED BENEFICIARIES
Covered Employee
Covered Spouse
Covered Dependent
Covered Dependent
Child Born To, Or Adopted By, Covered Employee
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SEPARATE PLANS
Separate MEDICAL Plan
Medical Only Medical Dental Medical
Vision Medical, Dental Vision Dental
Only Dental Vision Vision Only
Separate DENTAL Plan
Separate VISION Plan
Qualified Beneficiaries Can Elect ANY Of These
Combinations
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HIPAA Requirement Certification of Creditable
Coverage

• Pre existing condition issue is waived
• 63 day look back is waived
• No requirement to provide coverage in any Retro
  manner

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American Recovery and Reinvestment Act (ARRA)

• Signed on February 17, 2009
• Takes effect immediately
• DOL published final documents
• DOL Subsidy language due March 19th

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Overview

• Assistance Eligible Individuals (AEIs)
• The Subsidy Premium Assistance
• Alternate plan offering
• Benefits Covered Under ARRA
• Extended Election Period
• How the Money Works
• Notices
• Non-compliance Penalties

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What does the ARRA mean to COBRA?

• Offer second-chance COBRA to those who did not
  originally take it or took it and no longer have
  it
• Must notify anyone experiencing a qualifying
  event from September 1, 2008 through December 31,
  2009
• New notices must be created
• Changes made to payroll to incorporate tax credit

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What is the subsidy

• Extension of election period for AEIs
• Obligation to inform of alternate coverages
• 35/65 split of cost of COBRA PREMIUM
• Government repayment of 65 of COBRA premium

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Who Must Comply

• Any employer that must comply with COBRA must
  also comply
• Any states with mini-COBRA must comply

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Who is Eligible?

• Those eligible are known as Assistance Eligible
  Individuals (AEIs)
• Anyone involuntarily terminated or laid-off and
  dependents who are also qualified beneficiaries
  (Youre fired!)
• Involuntary seems to mean at the direction of the
  employer

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Who is Not Eligible?

• Those who voluntarily terminated (I Quit!)
• Divorcees or legal separations
• Dependents losing dependent status
• Retirees

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Who is Not Eligible?What about

• Offered and accepted early out?
• Quit in anticipation of discharge?
• Constructively discharged?
• Terminated due to gross misconduct?

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Special Rules for High Income

• Generally incomes between 125K and 145K (double
  joint) have scaled tax ramifications
• Earnings over 145K (290K joint) are not
  eligible and will face repayment if take subsidy.
• Multiple problems

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Subsidy Start Date(s)

• If coverage ends day of termination then possible
  eligible February 17
• For those with end-of-month coverage and are
  termed between September 1, 2008 and March 1,
  2009, subsidy begins March 1, 2009
• Any AEI termed between March 1, 2009 and December
  31, 2009 would start the day COBRA begins

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New Notice Timeline
ARRA Signed
Date DOL should have final notices
Subsidy eligibility notices must be sent
February 17
March 19
April 18
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LOOK BACK NOTICES coverage lost October 1, 2008
Subsidy notice date
Election due Date
All Retroactive Premiums Due
April 18
June 17
August 1
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Other Timelines

• AEI have 60 days from date notice was sent to
  elect (or reelect) COBRA then 45 more days to
  actually pay
• AEI have 90 days from the date notice was sent to
  choose to switch to a cheaper plan, if offered by
  employer

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Eligibility Notices

• Subsidy Eligibility Notice
• Sent to anyone experiencing a qualifying event
  beginning September 1, 2008 Regardless of
  subsidy eligibility.
• Opens reason for termination to scrutiny
• Lists eligibility requirements
• Provides election options
• Offers AEI chance to enroll on cheaper plan (if
  employer allows)

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Eligibility Notices

• 4 Possible Notices
• General Notice
• Abbreviated General Notice
• Alternative Notice
• Extended Election Notice

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End of subsidy notice

• End of Subsidy Notice
• Notifies AEI that they have reached the end of
  their 9-month subsidy eligibility
• Offers them right to continue under COBRA at full
  premium rate

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TAA Extension

• Extension beyond 18, 29, or 36 months
• COBRA terminates on earlier of
• a) Ceasing to be TAA-eligible
• b) December 31, 2010

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Subsidy Termination

• Participant reaches end of COBRA
• Participant reaches end of 9-month subsidy period
• Participant becomes eligible for other health
  coverage (such as Medicare, new employer, or
  spouses plan)
• Penalty of 110 if participant does not notify in
  writing

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Tax Credit

• The credit is claimed on Line 12a of the January
  2009 revision of the Form 941
• Form 941 filer also needs to include the number
  of individuals provided COBRA premium assistance
  on Line 12b. Each individual counts as a unit,
  i.e. a family is counted as one individual, as
  would an employee/spouse

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IRS Form 941
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Who Receives Tax Credit?

• The entity to whom the reimbursement is payable
  is
• (1) the multiemployer group health plan
• (2) the employer maintaining a group health plan
  that is subject to Federal COBRA continuation
  coverage requirements or that is self-insured
• (3) the insurer providing coverage under a plan
  not included in (1) or (2).  (mini-COBRA)

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Documentation required

• But not submitted
• Accounting of receipt of COBRA payments
• Copy of insurers invoice (fully insured)
• Proof of premium payment and coverage
• Attestation of involuntary termination
• Proof of AEIs eligibility for premium
• SSNs of all eligible employees covered by
  subsidy, amount of each subsidy, and whether for
  1 or 2 or more

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Potential Issues

• Handling employer paying part or all of COBRA
  premiums
• Collection of administrative fee
• AEI not reporting loss of eligibility status
• Fronting significant dollars

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Potential Issues

• Right to Appeal to DOL maximum 15 day decision
  cycle
• De novo case only
• By statute, Appeal Court must defer to the ALJ

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Potential Issues

• Unpreparedness by carriers
• Violations of ARRA subject to general COBRA
  penalties - 110 per diem and 100 per diem
  excise tax
• Back medical expenses
• Difficulty in multiple countdowns and mistaken
  timelines

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To DONOW!

• Make sure all AEIs were identified
• Decision on optional coverage offering
• Determine all subsidy enactment procedures
• Employer continuation of subsidized COBRA?
• How to handle premium overpayment and re-crediting

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To DONOW!

• Determine procedures to end subsidy and continue
  normal COBRA
• Revise and update all COBRA materials
• Coordination with payroll activities
• Subsidy notices sent out April 18
• Fully-prepared administrative systemright now!

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COBRA ADMINISTRATION

• YOUR QUESTIONS?
• Thomas N. Dondore, SPHR
• www.hrstndassociates.com