COBRA Premium Subsidy

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA). This act provides for COBRA premium reductions and additional election opportunities. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed through an employer tax credit.

Changes Regarding COBRA Continuation Coverage Under ARRA

Premium Reduction: The premium reduction for COBRA continuation coverage is available to "assistance eligible individuals".

An "assistance eligible individual" is the employee or a member of his/her family who:
  • is eligible for COBRA continuation coverage at any time between September 1, 2008 and December 31, 2009;
  • elects COBRA coverage; and
  • is eligible for COBRA as a result of the employee's involuntary termination between September 1, 2008 and December 31, 2009.
Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. There is no premium reduction for premiums paid for periods of coverage prior to February 17, 2009.

ARRA treats assistance eligible individuals who pay 35 percent of their COBRA premium as having paid the full amount. The premium reduction (65 percent of the full premium) is reimbursable to the employer as a credit against certain employment taxes. If the credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the employer.

State Health Plan Process - Abbreviated Summary

Retroactive Process for Individuals Involuntarily Terminated Between September 1, 2008 and February 16, 2009

The State Health Plan will issue the COBRA subsidy notice to all individuals that received a COBRA notice from September 1, 2008 to February 16, 2009.
The COBRA subsidy notice will include the following documents and will be mailed prior to April 17, 2009.

Ongoing Process for Individuals Involuntarily Terminated after February 16, 2009
On an ongoing basis, BCBSNC will issue the COBRA subsidy notice that will include the following documents, along with the normal COBRA offer letter to all COBRA eligible individuals. For additional information on ARRA go to the Department of Labor Web site at www.dol.gov/ebsa/cobra.html or the Internal Revenue Web site at www.irs.gov/newsroom/article/0,,id=204505,00.html.