Benefitfocus Healthcare Reform Journal: Healthcare Reform Update

The FY 2010 defense appropriations bill was signed into law on Dec. 19, 2009.

Though it mostly provides funding for defense projects, the legislation also includes money for a two-month extension of unemployment benefits and COBRA medical insurance subsidies that were part of the American Recovery and Reinvestment Act of 2009.
The legislation does the following:

Expands the nine-month, 65 percent COBRA premium federal subsidy to 15 months.
Extends the end date of eligibility for the subsidy from December 31, 2009 to February 28, 2010.
Changes eligibility requirements for the subsidy to only one qualifying event – an “involuntarily termination” of employment on or before Feb. 28, 2010.
Employees who are involuntarily terminated before Feb. 28, 2010 but get COBRA coverage that starts after that date would qualify for the subsidy.
Provides for a 60-day period for the retroactive payment of premiums for assistance eligible individuals (AEIs) who failed to pay their premium for December coverage.
Requires a special notice describing the new subsidy provisions be sent to all AEIs who have been on COBRA on or after Nov. 1, 2009, or whose qualifying event is an "involuntary termination" of employment occurring on or after Nov. 1, 2009.
The U.S. Department of Labor, the U.S. Department of Health and Human Services, and the Internal Revenue Service all could issue guidance concerning the subsidy extension

Employers must send extension letters (described above) within 90 days of enactment.
Employers will have to determine the overpayments and decide whether to offset future COBRA premium payments by the amount of the overpayments or issue refund checks.
Employers and COBRA administrators will need to identify beneficiaries whose eligibility for the subsidy ended, send them the required notice and, assuming they pay the required premium, retroactively restore their COBRA coverage.
Since COBRA premiums are not due until 30 days after the start of a monthly coverage period, beneficiaries – if they received notice quickly – would have time to make their December premium payments reflecting the 65 percent federal subsidy.