President Barack Obama signed the American Recovery and Reinvestment Act (ARRA), commonly known as the Stimulus Plan, into law on February 17, 2009. Portions of ARRA provide for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA.

The United States Department of Labor (USDOL) is the federal agency responsible for COBRA and the benefits related to the election of COBRA under ARRA. Their Web site is www.dol.gov. For updated information, please refer to this site and click on the American Recovery and Reinvestment Act Information.

The Centers for Medicare and Medicaid (CMS) is the federal agency responsible for the state continuation benefits under ARRA. For updated information on state continuation, please go to the following Web site: www.cms.hhs.gov/COBRAContinuationofCov and then click on Regulations and Guidance and then on More and then on COBRA Continuation of Coverage under Health Insurance Reform.

For entities that have 20 or more employees: Under ARRA, those employees that were involuntarily separated from their job (not for gross misconduct) from September 1, 2008 through December 31, 2009, are entitled to have the federal government subsidize 65% of their COBRA payments. Also eligible for this assistance is the employee’s spouse and dependents who elect COBRA due to the employee’s involuntary separation. This subsidy is taken by the employer directly from the payroll taxes when the separated employee pays 35% of the COBRA premium. Payroll taxes include federal income tax withholding and employee and employer FICA taxes. This subsidy is good for up to nine (9) months. Once a separated employee qualifies, then all other COBRA rules apply. The subsidy is not available to individuals whose income, in the year that they

receive the subsidy, exceeds $125,000 or couples filing joint tax returns that exceed an income of $250,000.

For entities subject to State Continuation (less than 20 employees): For Nevada state continuation laws, see Nevada Revised Statutes (NRS) 689B.245 through NRS 689B.249, inclusive, or NRS 689C.340 through NRS 689C.348, inclusive (both sets of statutes are the same and apply to entities with less than 20 employees). Under ARRA, those employees that were involuntarily separated from their job (not for gross misconduct) from September 1, 2008 through December 31, 2009, are also entitled to have the federal government subsidize 65% of their state continuation payment. When the separated employee remits 35% of the state continuation premium to the carrier, the carrier will provide the 65% premium subsidy to the separated employee and then receive a tax credit from the federal government. This subsidy is good for up to nine (9) months.

Who does the ARRA apply to? The new law applies to all group health plans that are subject to COBRA and State Continuation, including state and local governments subject to COBRA.

When may eligible individuals receive the subsidy? The subsidy can be applied to premiums for the first period of coverage beginning March 1, 2009. The subsidy is on a going- forward basis and not retroactive.

Who receives the reimbursement? For COBRA, the government reimburses the employer through a reduction in payroll taxes. For state continuation, the insurer is entitled to the reimbursement, through a tax credit, after filing. For Multiple Employer Welfare Arrangements (MEWAs), the plan is entitled to the reimbursement. The new law allows a “grace period” during the first two months of coverage, which provides a two month period for the employer to credit or refund overpaid premiums.

Extended Election Period (Second Chance): Individuals whose employment was involuntarily terminated on or after September 1, 2008 and before February 17, 2009 and met the following criteria:

1. The separated individual initially declined to elect group continuation coverage; or

2. Elected group continuation coverage and later stopped paying premiums, qualify for a second chance to elect COBRA and receive the subsidy.

The individual will have 60 days to enroll after receiving the notification from the employer. This opportunity to enroll is referred to as the “extended election period.” When providing coverage to former employees who elect continuation coverage during the extended election period, employers/carriers may not apply pre-existing condition coverage limitations based upon a gap in coverage between the involuntary separation and commencement of the group continuation coverage.

ARRA does not provide for a second chance for state continuation (entities with less than 20 employees). This second chance period ended on April 18, 2009 for all COBRA participants. Each state that wants to provide for the second chance election must pass legislation to do so. Assembly Bill 546 has been signed by the Governor to allow for this second chance opportunity. Individuals who are eligible for this second chance under state continuation have the same criteria for eligibility as the COBRA eligible individuals, except that their election

period is good until Aug. 31, 2009, and can be retroactive to May 1, 2009. The carriers are responsible for the 65 percent subsidy once the eligible individual pays their portion of the premium (35 percent).

Employer Refusal to Provide Group Continuation Coverage: The new law requires the USDOL to provide an expedited review of any employer’s refusal to allow a worker to elect group continuation coverage and receive the subsidy. Once the denied individual submits an application for review, the USDOL shall make an eligibility determination within 15 business days. If you have questions, contact the USDOL at (866) 444-3272 or visit the agency Web site: http://www.dol.gov/ebsa/COBRA.html. The telephone number for the USDOL at the San Francisco Regional Office is: (415) 625-2481.

State continuation appeals must go to the following address:

For additional information, the CMS e-mail address is: NewCobraRights@cms.hhs.gov.

Plans Covered: All group health plans subject to COBRA or State Continuation are eligible for the subsidy, including medical, hospitalization, vision and dental plans. Flexible spending accounts are not eligible.

Does the new law extend the length of available group continuation coverage? The new law does not change the length of time that group continuation coverage must be provided to eligible individuals. The subsidy is available for up to nine (9) months, but not longer than the maximum period under COBRA.

How can an eligible individual, under ARRA, lose eligibility for the group continuation subsidy? The eligible individual, under this law, can lose eligiblity for the group continuation subsidy in two ways:

1. The subsidy lasts no longer than nine (9) months.

2. When the person receiving the subsidy becomes eligibile for new group health coverage or Medicare.

Rules: The rules governing eligibility for subsidized COBRA differ from the rules governing eligibility for unsubsidized COBRA. Eligibility for unsubsidized COBRA ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the COBRA subsidy.

Notification: Beneficiaries must notify their former employer when they become eligible for new group health coverage. Those beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110% of the subsidy to the federal government. However, the penalty is not imposed if the beneficiary demonstrates “reasonable cause” for failure to notify.

Is the subsidy considered income for other Income-Based Government Programs? The subsidy will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program.

IRS: The IRS is holding weekly conference calls to address payroll issues for employers.

Additional Information: Please call the Division of Insurance, Consumer Services Section at (775) 687-4270 in Carson City, (702) 486-4009 in Las Vegas, or toll free in Nevada at 1-800-992-0900 for additional information.