The Department of Labor says it is working on guidance regarding the newly created subsidy for COBRA premiums.

The American Recovery and Reinvestment Act of 2009 (ARRA) provides for a 65 percent subsidy for COBRA continuation premiums for up to 9 months for workers who have been involuntarily terminated, and for their families.

The subsidy terminates when the covered individual is offered any new employer-sponsored healthcare coverage or becomes eligible for Medicare. Workers who were involuntarily terminated on or after September 1, 2008, and before February 17, 2009, but failed to initially elect federal COBRA continuation coverage, have an additional 60 days to elect federal COBRA and receive the subsidy.

To qualify for the subsidy, individuals must meet all of the following requirements:

• Is eligible for COBRA continuation coverage at any time during the period beginning September 1, 2008 and ending December 31, 2009;
• Elects COBRA coverage (when first offered or during the additional election period), and
• Has a qualifying event for COBRA coverage that is the employee’s involuntary termination during the period beginning September 1, 2008 and ending December 31, 2009.

The ARRA provides that an assistance-eligible individual (AEI) is treated as having paid the full premium required for COBRA continuation coverage for a coverage period if the individual pays 35 percent of the premium. The subsidy program is effective for the first coverage period beginning on or after February 17, 2009. In most cases (plans with calendar month coverage periods), this will be March 1, 2009.

The legislation requires that information on the COBRA subsidy be included in COBRA notices. Under the legislation, the Department of Labor must create a model notice within 30 days of February 17, 2009.