Keeping your health insurance benefits after you have been laid off from work can be difficult. But there is some help. A new federal law allows some workers who have been laid off or fired due to no fault of their own to keep their health insurance benefits at a reduced premium. The federal American Recovery and Reinvestment Act of 2009 (ARRA) provides for smaller monthly premium payments and other benefits under another federal law, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

What is the difference between COBRA and ARRA?

COBRA requires that businesses employing 20 or more people and providing group health plans must give those employees the right to choose to continue their health coverage for a limited period of time after they leave work. Under COBRA, group health plans may charge qualified people the entire premium, up to 102 percent of the cost of the plan (the full cost plus a 2% administration fee) to continue coverage. Under ARRA, people who are eligible for COBRA coverage are now eligible to pay a reduced premium of 35 percent of the cost of the plan for up to nine months. People who pay the reduced premium are treated as having paid the entire premium. The remaining 65 percent is reimbursed to the employer as a credit against payroll taxes. Here is an example of how this might work:

Anna, an employee who works for a large employer, is laid off from her job because her employer is downsizing. The total amount she paid for her health insurance premium before she was laid off was $300. Under COBRA, Anna would have to pay $306 ($300 premium plus a 2% administration fee) per month to keep her insurance Now, because of ARRA, Anna only has to pay $105 per month (35% of $300).

How do I know if I qualify for ARRA benefits?

To get ARRA benefits, you must be considered an assistance-eligible individual. Under ARRA, an assistance-eligible individual is an employee or family member who:

• Is eligible for COBRA coverage between September 1, 2008, and December 31, 2009;
• Elects COBRA coverage; and
• Is eligible for COBRA coverage as a result of the employee’s involuntary termination between September 1, 2008, and December 31, 2009.

For the purposes of ARRA, the definition of involuntary termination includes but is not limited to:

• A layoff period with the right of recall,
• Retirement where the employee knows that the employer would have otherwise laid him or her off, and
• Termination with cause. (This is different from termination for gross misconduct. Employees terminated for gross misconduct may be ineligible for COBRA coverage.)

How long will I be covered if I am eligible?

The premium reduction applies to periods of COBRA coverage beginning on or after February 17, 2009. For plans that use a calendar month for the basis of COBRA coverage, the premium reduction begins on March 1, 2009. An assistance-eligible individual is eligible for the premium reduction for up to nine months. However, the premium reduction will not extend beyond the period of COBRA coverage. Also, an assistance-eligible person who becomes eligible under another group health plan or Medicare will no longer be eligible for the premium reduction.

Will I have to repay the ARRA benefits?

If you have an adjusted gross income that exceeds $125,000 (or $250,000 for joint filers), you may be liable for repayment of some or all of the premium reductions under ARRA. You may choose to waive the right to the premium reduction because you believe that you may be in these income categories. However, if you do, you may not later be able to get the reduction if it turns out that your adjusted gross income is lower than expected.

What happens if I would have qualified for ARRA but did not know about the new law?

ARRA requires the employer’s health benefits plan administrator to notify individuals who have a COBRA-qualifying event from September 1, 2008, to December 31, 2009, that they may qualify for the premium reduction. For those individuals involuntarily terminated between September 1, 2008, and February 16, 2009, who did not elect COBRA when first offered or who elected COBRA but ended the enrollment prematurely, ARRA permits election or re-election. The election period begins on February 17, 2009, and ends 60 days after the plan provides notice, as required by COBRA.

You may find more information about COBRA and ARRA on the Department of Labor’s Web site.

This article is from the September 2009 issue of Looking Out for Your Legal Rights^®.