Advantage Benefits

Q: Can you please define the term 'involuntary termination' as it relates to COBRA?

A: When discussing termination of employment for the purpose of determining COBRA eligibility, there are 2 areas that need to be evaluated. First, was the decision to terminate the employee solely in the hands of the employer? If it was, then the termination was involuntary on the part of the employee. If, in fact, the employer made the decision, the other question that needs to be asked is if the termination was based on any gross misconduct by the employee. If the termination was based on a slow-down in business (lay-off), then the employee would be eligible for COBRA and the new 65% subsidy being offered by the federal government. If the employee played a part in the termination by his/her own actions (firing), then they employee would not be eligible for COBRA benefits or the subsidy. If an employee chooses to leave the company voluntarily (quitting, retiring, etc.), they would not be eligible for the COBRA subsidy.

Q: The health insurance carrier that we use sends out their bills in advance. Do I have to front the premium for employees on COBRA?

A: Unfortunately, you do. Employers are required to pay the premium directly to the insurance carrier, and receive reimbursement after the fact. You need to make sure that you make it clear to all employees on COBRA that their part of the premium is due by the first of the month. For those employees eligible for the new COBRA subsidy, their portion is 35 % for up to 9 months. The remaining 65% will be reimbursed by the federal government to employers as a deduction on their quarterly tax returns.

Q: When is the deadline to send a second notice to the employees that are already on COBRA or declined prior to the new changes?

A: Employers must notify all COBRA eligible employees (those that were involuntarily terminated between 9/1/08 - 2/17/09) by April 18, 2009, which is 60 days after the bill was signed. The employees then have 60 days from the time they receive the notice to respond to employers with their decision whether to elect COBRA with the new subsidy changes. As stated before, the federal government is currently drafting a "model notice", and they have until March 17th to make that available to the public. We will forward along as soon as it is released.

Q: As an employer, how do I determine if my employees qualify financially for the COBRA subsidy?

A: It is the employer's responsibility to notify eligible employees of the guidelines of qualifying for the COBRA subsidy. It is the employees responsibility to examine the guidelines and decide if they want to elect the coverage, based on all of the guidelines. Employees may still qualify for COBRA, but not for the subsidy, so they need to be aware of that when they make their decision. Since you, as an employer, can't know their entire financial situation, the employee needs to make that determination by examining their income and requesting guidance from their tax accountant or attorney.