The American Recovery and Reinvestment Act, now signed into law, is a 1,000-page plan to spend $787 billion. The subsidy of COBRA premiums provided in the legislation is one provision that will particularly affect the self-funded health plan sector of the economy.
Though I have not read the text, here is a summary from Workforce Management:
The COBRA subsidy would give employers tax credits for paying a large portion of a former employee’s health care premium for up to a year. It provides a nine-month, 65 percent subsidy for COBRA premiums for people who lose their jobs between September 1, 2008, and December 31, 2009. The premiums average about $1,000 a month.
Of course, COBRA terminees are not the best actuarial asset for a self-funded plan. Thus, this move will increase the burden to self-funded health plans.
Here is a troubling aspect of the legislation – it will be offered to those who lost their jobs from Sept. 1 to the end of this year – and, according to this report,
those who were put out of work after September but didn’t elect to have COBRA coverage at the time will have 60 days to sign up.
Business Insurance states:
Employers will face a significant communications and administrative challenge to comply with the COBRA provisions, which go into effect March 1.
Employees who were laid off since Sept. 1, 2008, and declined to opt for COBRA coverage will have a new right to enroll in COBRA, and employers are required to inform those individuals of that right.
The failure to provide COBRA notices can result in substantial penalties. Moreover, until the COBRA notice is supplied, the election period does not begin to run.
If this is the beginning of a push to place more uninsured on employer-based plans, as many are predicting, then there will be perilous times ahead for those employers that opt to self fund their benefit plans. The task at hand, however, will be to start identifying those workers that involuntarily separated from service since September 1, 2008.
DOL will be preparing a model notice. I’ll update this post later with upcoming compliance deadlines