Proposed COBRA Changes
The Facts
Health reform legislation approved by the House would extend COBRA coverage until the earlier date on which a COBRA-eligible individual becomes eligible for coverage under an employer plan, or is eligible for coverage under a plan offered in an insurance exchange. Under current COBRA rules, COBRA-eligible individuals may elect COBRA for up to 18 months based on the employee’s termination of employment or loss of coverage due to a reduction in the employee’s work hours, or up to 36 months for divorce, death or loss of dependent eligibility. The reform bill would not extend the 65 percent COBRA subsidy program that is scheduled to sunset December 31, 2009, although other legislation pending in the House (H.R. 3930) and Senate (S. 2730) would extend and expand this subsidy. President Obama supports extending the COBRA subsidy.
H.R. 3930 would extend the eligibility period to June 30, 2010, and would increase the maximum period of the subsidy from nine to 15 months. H.R. 3930 would not increase the amount of the government subsidy beyond 65 percent or expand the eligibility criteria, but it would extend the current 18-month period of COBRA coverage to 24 months for eligible individuals terminated from employment between April 1, 2009, and December 31, 2009. S. 2730 also would extend the subsidy period but would additionally increase the subsidy amount from 65 percent to 75 percent of the COBRA premium. S. 27390 would expand eligibility for the subsidy to include workers who experience a loss of health coverage as a result of an involuntary reduction in hours.
What’s at Stake
Because COBRA is typically elected by less healthy participants, extending COBRA beyond the typical 18-month period and increasing the government subsidy may drive up the cost to group health plans for this extended coverage.
Steps to Consider
Although it is unclear whether these COBRA extensions and expansions will be added to the health reform legislation, group health plans should carefully monitor developments and plan for the possibility of these changes.
