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How the Public Employees Benefits Board (PEBB) Program Will Implement the Federal COBRA Premium Reduction
Background
On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA) of 2009 (stimulus bill) into law. This law provides funding to help certain individuals pay for their COBRA premiums. It also provides another opportunity for some eligible former employees and their federally qualified dependents to enroll in COBRA.
What Is COBRA?
COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, allows an employee who leaves his employer to continue health insurance through that employer. Generally, the employee and any of the employee's qualified beneficiaries pay the full cost of the coverage, without the employer's contribution.
Highlights of the Law
What It Does
- Provides a 65% subsidy for COBRA premiums for certain "assistance-eligible individuala" (AEIs) for up to 15 months. This means that eligible members will pay 35% of the cost of their COBRA premiums (that is, a reduced premium) for medical-only, dental-only, or medical and dental coverage. See reduced-premium COBRA rates.
- Allows AEIs to enroll in different health coverage or a different health plan than what they were enrolled in as an employee. The coverage or plan choice, however, must cost the same or less than the coverage or health plan they were enrolled in as an employee to receive the reduced premium. See table on the second page of the reduced-premium COBRA rates.
- Provides a special election period for two groups of individuals, as stated below under "Who Is Eligible for Reduced-Premium COBRA?"
Who Is Eligible for Reduced-Premium COBRA?
Former employees and their federally qualified dependents who no longer qualify for employer-paid PEBB coverage defined as "assistance-eligible individuals" are people who no longer qualify for employer-paid PEBB coverage due to:
- The employee’s involuntary termination between September 1, 2008 and May 31, 2010, or
- The employee had a reduction in hours resulting in loss of PEBB coverage between September 1, 2008 and May 31, 2010, followed by an involuntary termination between March 2, 2010 and May 31, 2010.
Assistance-eligible individuals must also:
- Qualify for COBRA coverage. This includes a child who is born or adopted during the COBRA continuation period; and
- Not qualify for other group health coverage, Medicare, or Medicaid.
Note: Assistance-eligible individuals with high incomes (as defined below) may choose to waive their rights to the COBRA premium subsidy, or claim the subsidy and repay it through their taxes.
The amount of the subsidy is recaptured for individuals who earn more than $145,000 (or $290,000 for joint filers) in modified adjusted gross income per taxable year. In this case, the individual must repay any amount of premium subsidies received for all months during the taxable year. For individuals who earn between $125,000 and $145,000 (single filer) or $250,000 and $290,000 (joint filers), the amount of the premium subsidies that must be repaid is reduced proportionately.
How It Works for AEIs Who Lost PEBB Coverage
The COBRA premium reduction period starts on:
- March 1, 2009 for eligible former employees and their eligible dependents who lost PEBB coverage between September 30, 2008 and February 28, 2009 and elected and are enrolled in PEBB’s COBRA, Leave Without Pay (LWOP), or non-Medicare retiree coverage or who elect to enroll during the special election period.
- The first day of the month after the employee’s involuntary termination, if the termination occurs on or after February 17, 2009.
The COBRA premium reduction period ends on:
- The end of the 15th month of reduced-premium COBRA coverage or the end of the COBRA coverage period (usually 18 months after the termination), whichever comes first; or
- The end of the month before the former employee becomes eligible for other group health coverage, Medicaid, or Medicare, regardless of whether the employee enrolls (some exceptions apply); or
- The end of the month in which COBRA coverage ends due to nonpayment.
What the PEBB Program Will Do for Eligible Individuals Who Lost PEBB Coverage
Working with agency personnel, payroll, and benefits offices, the PEBB Program will identify employees terminated since September 1, 2008 to notify them of the COBRA premium reduction and their rights. The PEBB Program will mail notices to these individuals starting in mid-April 2009. Former PEBB members who need more information, or do not receive a COBRA notice and believe they are eligible, should send an email to the PEBB Program.
How to Appeal a Denial for Reduced-Premium COBRA Coverage
If you apply for reduced-premium COBRA coverage and the PEBB Program denies your enrollment, you may appeal to the U.S. Department of Health and Human Services' Centers for Medicare & Medicaid Services. To do this, complete the Request for Review If You Have Been Denied Premium Assistance form, and submit it to the address shown in the appeal form. If you have questions about the appeal process, you may call toll-free 1-866-400-6689 or send an email to ContinuationCoverage@maximus.com.
For More Information
State and local government employees seeking more information about their rights should contact the U.S. Department of Health and Human Services’ Centers for Medicare and Medicaid Services (HHS-CMS) or send an email to NewCobraRights@cms.hhs.gov.
You can also find more information on these federal agencies’ websites:
Department of Labor
Department of Health and Human Services
Internal Revenue Service
