COBRA Premium Reduction under the Stimulus Bill

The American Recovery and Reinvestment Act of 2009 (known as the Stimulus Bill) provides a premium reduction to certain qualified individuals.  Individuals eligible for COBRA coverage who were involuntarily terminated by their employer on or after September 1, 2008 through December 31, 2009 who are eligible for COBRA and elect COBRA may be eligible to pay a reduced premium amount that is only 35 percent of the premium costs for the COBRA coverage.
The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 9 months from the beginning of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first.  The premium reduction provisions relate only to premiums for coverage periods beginning after the law was enacted –February 17, 2009.

If a person was terminated between September 1, 2008 and December 31, 2009 and was covered by an employer’s plan on their day of employment, the plan administrator should provide a notice of eligibility to elect COBRA and to receive a premium reduction.  Individuals involuntarily terminated during this period have the right to elect COBRA coverage even if they did not elect coverage when it was first offered; they may also do so if they did elect COBRA, but are no longer enrolled (for example, because they were unable to continue paying the premium). This election period begins February 17, 2009 and ends 60 days after the plan provides the required notice.

For more information the employer should be contacted directly to ask about getting the premium reduction, and how to reconcile any amounts that might have been overpaid after February 17, 2009.

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