When President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA)—also known as the Stimulus Package—the government took steps to expand access to health insurance for the millions of Americans who lost their jobs by amending the provisions covering the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The changes to COBRA benefits impact employers, like Dunkin’ Donuts franchise owners. All private employers that offer a group health insurance plan and that have 20 or more employees are impacted by these changes; those with fewer than 20 employees also are impacted to some degree.
Generally speaking, for workers and their families who have lost their group health insurance coverage, COBRA provides the opportunity to continue coverage through the former employer’s plan at their own cost.
ARRA provides qualified individuals with a 65% government subsidy of COBRA premiums. In addition to meeting income threshold requirements, individuals who are eligible for assistance must:
- be employees involuntarily terminated between September 1, 2008 and December 31, 2009;
- be eligible for COBRA continuation coverage; and
- elect COBRA coverage.
The COBRA premium subsidy is available for a period of coverage beginning February 17, 2009, provided the qualified individual pays 35% of the premium due. The subsidy is good for nine months or once the person is covered by a new group health plan or Medicare.
Beth O’Neal of Masterman, Culbert & Tully, LLP, a Boston law firm, points out that employers may recover their COBRA premium costs through a payroll tax credit. A new IRS Form 941 must be used to receive the premium subsidy reimbursement. If an employer’s payroll taxes are not sufficient to support the amount of the subsidy, a credit or refund will be issued.
According to Jim Munro of Paychex, a payroll, human resources and employee benefits company that is a DDIFO Associate Member and works with some DD franchises, “We are already working with clients to implement these changes. If you are using an outside payroll or benefits provider, make sure your vendor is actively following these developments and is ready to take appropriate action.”
April 18, 2009 was the deadline for posting a new COBRA notice to all individuals who had a qualifying event (e.g. an involuntary termination, a reduction in hours resulting in a loss of benefits, or resignation) on or after September 1, 2008 even if the individuals previously declined COBRA coverage.
The U.S. Department of Labor has set up a special website to explain the latest COBRA-ARRA related information for employees and employers,
For employers with fewer than 20 employees, many states have established “mini-COBRA” statutes governing health insurance coverage continuation. Families USA, a non-profit, non-partisan organization, provides information on what individual states are doing for workers at small businesses who lose their jobs. You can find out how each state is changing its laws here.