The New COBRA Premium Subsidy

Many employees who have recently lost their jobs don't know that the stimulus bill signed by President Obama on February 17, 2009 provides a COBRA subsidy for many employees who are terminated for up to nine-months after their termination.  The subsidy applies to certain eligible employees who are "involuntarily terminated" between September 1, 2008 and December 31, 2009. 

During the applicable period, eligible terminated employees will only be required to pay 35% of the COBRA premium.  This can be an enormous savings off the high cost of continuing health care coverage.  The remaining 65% of the COBRA premium must be paid initially by the employer, who will then be reimbursed by the federal government via a credit on employment taxes or a request for direct reimbursement. 

Employees are only eligible for the COBRA premium subsidy if they have been "involuntarily terminated."  Unfortunately, this term is not well defined and is likely to generate significant debate and potential litigation.  What is clear is that employees who resign without being forced out or who retire are not eligible for the subsidy. 

The Department of Labor should be publishing additional information and required notices in March 2009. Arizona employees and employers with questions regarding the COBRA premium subsidy should consult with an Arizona employment law attorney for additional information.