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Continuation Coverage Premium Subsidy Extended

April 19, 2010

By Thomas I. Kramer

BENEFITS NOTEBOOK 

On April 15, 2010, President Obama signed the Continuing Extension Act of 2010. Among other extensions, it extended the date within which an involuntary termination of employment may lead to a federal subsidy for continuation coverage under either federal COBRA or state continuation coverage rules.

Readers of our March 8, 2010 Bullard Alert know that the Temporary Extension Act of 2010 provided that individuals who lost group health plan coverage due to an involuntary termination of employment occurring not later than March 31, 2010 could be “assistance eligible individuals.” This new Continuing Extension Act extends that date further, so that individuals who lose group health plan coverage not later than May 31, 2010 can be assistance eligible individuals.

The new law retains the two other new aspects of the Temporary Extension Act.
 
  • A qualified beneficiary who lost coverage due to a reduction in hours that was followed by an involuntary termination of employment by that employer after March 31, 2010 also may be an assistance eligible individual effective with the first coverage period starting after the involuntary termination of employment.
     
  • Plan administrators must give notice to affected qualified beneficiaries of their right to the subsidy (in particular, those qualified beneficiaries who experience an involuntary termination of employment after March 31, 2010 but previously had experienced a reduction in hours that either left them ineligible for continuation coverage or eligible only for un-subsidized continuation coverage).

Congress is still working on a bill that would extend the continuation coverage subsidy through December 31, 2010.

The Oregon Insurance Division was closed on April 16, due to budget cuts, and has not yet responded to this new Continuing Extension Act. We expect the Division will amend its regulations to track the new federal law.

Last month, the Oregon Insurance Division amended its regulations to track, for the most part, the federal Temporary Extension Act for Oregon group health insurance policies subject to state continuation laws rather than COBRA. The amended regulations:
 
  • Provided for up to 15 months of subsidized continuation coverage for qualified beneficiaries who lost coverage due to an involuntary termination of employment before April 1, 2010. (Presumably new regulations will extend this to involuntary terminations before June 1, 2010).
     
  • Provided for up to 15 months of continuation coverage due to a reduction in hours after March 1, 2010 and before April 1, 2010. (Reduction in hours was not previously a qualifying event under Oregon law, unlike COBRA.) We expect new regulations will extend this to terminations before June 1, 2010.
     
  • Created a new 15-month-subsidy-generating qualifying event for qualified beneficiaries who –
     
    • Lost coverage due to a reduction in hours after August 31, 2008 and before April 1, 2010.
    • Did not elect, or made and discontinued an election of state continuation coverage.
    • Experienced an involuntary termination of employment after March 1, 2010 and before April 1, 2010.

In such cases, the qualified beneficiary’s maximum continuation period starts on the date of the reduction in hours, not the date of the involuntary termination. Thus, if a person lost coverage as a result of a reduction in hours on January 31, 2010, and the involuntary termination occurred on March 15, 2010, his or her 15-month maximum continuation period would begin on January 31, 2010, giving rise to up to 13 months of subsidy, starting April 1, 2010.

Presumably new regulations will extend the subsidy to qualified beneficiaries who experienced a reduction in hours before April 1, 2010 and experienced an involuntary termination of employment on or after that date and before June 1, 2010.

As under COBRA, the qualified beneficiary is not required to pay for state continuation coverage between the reduction of hours and the involuntary termination of employment, and the time the individual lacked coverage is disregarded for purposes of determining periods of creditable coverage in applying pre-existing condition limitations.

Watch for Bullard Alerts about changes to or extensions of the subsidy for continuation coverage. Please feel free to contact us if you have questions or comments about this new law, or any matters relating to employer-sponsored benefits. 
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