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The ARRA Makes Significant Changes to COBRA Continuation Benefits

June 16, 2009

The American Recovery and Reinvestment Act (“ARRA”) of 2009 created a significant subsidy for many individuals who become eligible for COBRA benefits. ARRA puts a temporary cap of 35% of the amount of the cost of the COBRA premium that an eligible individual must pay. Previously, the individual was required to pay the full cost of the COBRA premiums. The employer or, in some cases, the multiemployer health plan or insurer, must pay the remaining 65%, but will be reimbursed by way of a federal payroll tax credit. To be eligible for the ARRA subsidized COBRA benefits, individuals must have been involuntarily terminated between September 1, 2008 and December 31, 2009, and must elect COBRA continuation benefits. If the individual is eligible for other group health coverage or Medicare, the individual is not eligible for the ARRA subsidy.

Further, those individuals who were involuntarily terminated between September 1, 2008 and February 16, 2009, when ARRA was signed into law, and could have elected COBRA but did not, or did elect COBRA but subsequently stopped continuation coverage prior to February 16, 2009, must be given another opportunity to elect continuation coverage.

If you have questions about how the ARRA changes to COBRA affect you or your business, please call an employment law attorney at Blethen, Gage & Krause, PLLP.

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