What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1996 amended the Employees Retirement Income Security Act (ERISA) of 1974, the IRS code and the Public Health Services Act to provide continuation of group health coverage that might otherwise be terminated. The coverage is usually more expensive for the employee than regular coverage under a group plan because the cost is not offset by employer contributions. However, it is less expensive than comparable coverage on the individual market and it offers protections under group coverage. If you maintain continuous group coverage you cannot have a pre-existing condition exclusion applied to you by another group plan. Plans can charge up to 102% of the actual cost of the premium for COBRA coverage. To qualify for COBRA coverage you must experience one of these qualifying events:
- A voluntary or involuntary termination of employment that results in loss of benefits, unless the termination is due to gross employee misconduct
- A reduction in hours of employment that results in loss of benefits
- For spouses or dependent children, divorce, legal separation or death of the employee
- For dependent children, loss of dependent status
You must be covered by the plan at the time of the qualifying event and the plan must still be in effect for covered employees. You can claim coverage for your dependents and not for yourself, which you might do if you are eligible for Medicare and your spouse is not. You have 60 days from the loss of benefits or from the date your plan notifies you of a loss to elect COBRA coverage. If you waive coverage, you can revoke the waiver within that 60-day period but the plan may only cover you beginning the date the waiver was revoked. Otherwise, the coverage begins on the date benefits were lost. If an employee becomes eligible for Medicare during COBRA coverage, he/she may become ineligible for COBRA. However, if Medicare coverage is in effect during the 60-day election period COBRA benefits cannot be denied for that reason. The employee is entitled to the same benefits as regular covered employees. COBRA generally lasts 18 months, however, if there is a second qualifying event such as those listed above, during the 18-month period, the COBRA period can be extended up to 36 months. If the Social Security Administration determines that you are disabled you can receive an additional 11 months of coverage. The plan is allowed to charge up to 150% of the premium cost for that extended period.
COBRA through Local 802 HBP
Local 802 COBRA premiums are as follows:
- Plan A+ with hospitalization ($4,300 level): Individual-$513.20/month, Family-$1,320.72/month
- Plan A+ without ($3,200 level): Individual-$364.20/month, Family-$933.31/month
- Plan A: Individual-$251.60/month, Family-$651.85/month
- Plan B: Individual-$50.95/month, Family-$109.04/month
These rates may be reduced by 50% of employer contributions if the employee is included in the coverage and if the premium is paid in advance for each six-month period in a lump sum. For example: a member is participating in family coverage at the Plan A+ $3,200 level and he achieves only $3,000 thus missing the level by $200. The COBRA premium for the family is $933.31/month for six months, which is $5,599.86. This lump sum can be reduced by 50% of the $3,000 in employer contributions ($5,599.86-$1,500=$4,099.86). The member pays $4,099.86 in advance for six months of family Plan A+ without hospitalization coverage.
If the six-month lump sum is less than the qualification level for the plan, the larger of the two sums must be paid. For example: the six-month premium level for an individual on Plan A+ with hospitalization is $3,079.20. However the level you must achieve to qualify is $4,300. The individual must pay the $4,300 to get the 50% rate reduction.
Call the Local 802 HBP Office, (212) 245-4802 for additional self-pay rules.
Any level of employer contributions above $1,400 (Plan A) can be banked for six months. The excess is carried over and used to help you get the highest level possible. It can be added to the subsequent six-month “bank.” Any banking credits not used after two six-month periods are forfeited. The maximum credit that can be carried is $8,600 (2X Plan A+ $4,300 level). Married couples and domestic partners can pool their banking credits.
You are entitled to COBRA coverage up to the level you achieved at the time of the loss of benefits. For example: If you fall from Plan A+ to Plan A you can get COBRA back up to Plan A+. By the same token, if you fall from Plan A+ to Plan B, you can choose to get COBRA only back up to Plan A. Because of banking credits, there may be a lag between losing employment and losing coverage. The coverage would be lost either on April 1 or October 1 in a given year.
Federal COBRA subsidy
The American Recovery and Reinvestment Act (ARRA) signed into law on February 17, 2009 by President Obama, authorized a 65% subsidy on COBRA premiums for 9 months. On December 16, 2009, he signed the Department of Defense Appropriations Act for fiscal 2010 which extends the period to 15 months. It also extends the qualifying period.
To qualify for this subsidy you must:
- Experience an involuntary termination of employment between September 1, 2008 and February 28, 2010 that results in a loss of benefits, unless the termination is due to gross employee misconduct. A strike does not count as an involuntary termination but an employer lockout does.
- Experience an involuntary furlough, layoff or reduction in hours that results in a loss of benefits.
- Elect COBRA coverage. If you qualified for COBRA on or after September 1, 2008 but did not elect COBRA coverage, you must be given 60 days to elect COBRA coverage so you can receive the subsidy. The subsidy would begin in the COBRA period on or after February 17, 2009. There is no retroactive subsidy for any period before February 17.
You are not eligible for the subsidy if you are eligible for Medicare or any other group plan, including a spouse’s or domestic partner’s plan. You cannot qualify for the subsidy as a spouse or dependent because of divorce from or death of the employee.
If you lost your subsidy because the 9-month period expired before December, 2009, and you paid the full COBRA premium you should contact your plan administrator to discuss reimbursement and/or future subsidies.
A subsidy-eligible person pays 35% of the COBRA premium to the plan and the plan treats it as a fully paid premium. You cannot be taxed on the subsidy and you also cannot claim it as a tax credit—it is only available as premium assistance. The subsidy will last until 15 months from the first day of subsidy coverage, or until you become eligible for regular group coverage or when the COBRA period expires, whichever comes first. If you become eligible for Medicare or other group coverage while receiving the subsidy and you fail to notify the plan, you can be assessed a tax penalty of up to 110% of the improperly received premium assistance. If your yearly income is $125,000 for an individual or $250,000 for a couple the IRS will recapture a percentage of the subsidy on your yearly taxes that increases with your income. At $145,00 a year for an individual or $290,000 for a couple the recapture is 100%. You can avoid this by waiving the COBRA premium assistance permanently.
NY State COBRA subsidy for the Entertainment Industry
The COBRA subsidy bill signed into law in 2004 by Governor Pataki allowed entertainment industry employees to qualify for state assistance equal to 50% of COBRA premiums from one of the entertainment industry’s collectively-bargained health plans. The employee was able to receive 12 months of this assistance in his/her lifetime.
This has been changed, effective June 1, 2009. Now an employee can receive the same subsidy for 12 months per COBRA period with no lifetime limit. Each time there is a new COBRA period the employee can reapply for another 12 months of subsidies.
To qualify you must:
- Be a New York State resident
- Be eligible or covered by COBRA through a collectively bargained plan covering entertainment industry employees
- Not be receiving COBRA continuation assistance through the NY State Department of Health program
- Not be eligible for Medicare
- Not be eligible for any employer-sponsored coverage, including spouse’s or domestic partner’s plan
- Fall within the monthly income limits below. All income, including spouse’s or domestic partner’s must be counted. Pregnant women count as two people.
1 person – $2,257
2 people – $3,036
3 people – $3,815
4 people – $4,594
5 people – $5,373
6 people – $6,153
each additional person $780
You can coordinate the federal premium subsidy with the state subsidy. If you elect both subsidies at the same time, the state will pay the 35% of the COBRA premium. When the state subsidy runs out in 12 months you will then have to pay 35% for the remaining three months of the federal subsidy period. If you defer the state subsidy you will pay the 35% of the COBRA premium until the federal subsidy expires. Then the state will pay 50% for 12 months or until you come off COBRA, whichever comes first.
On November 19, 2009, Governor Patterson signed an amendment of the state insurance law that now allows unemployed workers to extend their COBRA periods from 18 to 36 months beginning November 1, 2009. This applies to in-state and out-of-state employees who are covered by a New York policy.
You can download an application at the NYS Continuation Assistance Program website. There is also a link on the 802 website under “union benefits.” You will need to know your COBRA premium amount per month and when you became COBRA eligible. You will need to attach the COBRA notification from your plan and paycheck stubs or unemployment computer printouts or other documents proving your income. The state subsidy is not retroactive, you can only receive it from the time you are accepted into the program.