Courtesy of the EBIA Weekly:

 

The President has signed the Trade Adjustment Assistance Extension Act of 2011, which generally reauthorizes the Trade Adjustment Assistance (TAA) program through December 31, 2013. Among other things, the legislation increases the health coverage tax credit (HCTC) to 72.5% of the health insurance premiums of certain eligible individuals and their qualifying family members for eligible coverage months beginning after February 12, 2011. The HCTC is generally available to eligible individuals under the TAA and Alternative Trade Adjustment Assistance (ATAA) programs (which assist individuals who have become unemployed as a result of increased imports from, or shifts in production to, foreign countries), and to retirees receiving PBGC pension benefits, who have lost their employer-sponsored health coverage.

EBIA Comment: The HCTC applies in limited circumstances and should not be confused with the 65% COBRA premium subsidy under the American Recovery and Reinvestment Act (ARRA), which is generally not available after August 2011 (see our article) and was not extended by this legislation. The HCTC premium credit has been increased to 72.5% from the 65% credit that has been in effect since the expiration (in February 2011) of the 80% credit put in place under ARRA (see our article). For more information, see EBIA’s COBRA manual at Section XXXIV (“Special Issues: The Health Coverage Tax Credit (HCTC) and the Special Second COBRA Election Period”); see also EBIA’s Cafeteria Plans manual at Section XVII.F (“Cafeteria Plans and the Health Coverage Tax Credit (HCTC)”).

 

 Available at http://www.gpo.gov/fdsys/pkg/BILLS-112hr2832enr/pdf/BILLS-112hr2832enr.pdf

 

 

If the American Recovery and Reinvestment Act wasn’t enough to make employers reexamine their trust relationship with their COBRA administrator, the IRS Form 8928 reporting requirements should certainly do so.  Beginning with the 2010 Plan or taxable year, employers are now required to self-report their failures to comply with COBRA, HIPAA, and other health plan regulations to the IRS on Form 8928 and pay excise taxes and penalties for these compliance failures.  If you’re not familiar with Form 8928, the instructions for the Form can be found on the IRS website here www.irs.gov/pub/irs-pdf/i8928.pdf, and the Form itself can be found here www.irs.gov/pub/irs-pdf/f8928.pdf. While the penalties for failing to comply with COBRA have always been there, now employers can’t cross their fingers and wait for a potential IRS audit or lawsuit to uncover them – they have to self-report them.   Furthermore, interest begins accruing on all excise taxes and penalties the moment they are due if they are not paid on time, so a failure to report failures to comply will start to become very expensive quickly.

 

What does this mean for employers who outsource their COBRA compliance administration to a professional administrator?  It means employers better have a way to effectively review and audit the work performed on their behalf, and it better be a “real time view.”  The old fashioned “black box” method of providing outsourced COBRA administration where employers report Qualifying Events to their administrator by fax or file and then hope that the administrator does their job is no longer a viable model.  Employers should have real-time access to all QB records including access to the letters their administrator has sent to each QB.  Employers should also have access to real-time reports detailing letters sent to verify that all new hires and new Qualified Beneficiaries reported to the administrator resulted in the appropriate letters being sent and sent in a timely fashion.  Only through this kind of transparent view into their administrator’s world can any employer confidently report on their Form 8928 that they have had no compliance failures.  Waiting for paper reports at the end of the month simply does not provide employers the data they need in the time frame needed to ensure their compliance.  If you are an employer or group health plan sponsor who must comply with COBRA and your COBRA administrator is not providing you real-time, secure (always remember PHI) web-based access to your QB records and the reports you need, it is time (right now) to find a new COBRA administrator who will.

On September 27, 2010, the National Association of Insurance Commissioners (NAIC) released a draft bill for building and operating a state insurance exchange.  Please see the following document.

NAIC_DraftBill_StateInsExchanges_09272010.pdf (176.99 kb)

LINCOLNSHIRE, Ill., Aug 19, 2010 (BUSINESS WIRE) -- A new analysis by Hewitt Associates, a global human resources consulting and outsourcing company, shows that many workers are continuing to enroll in COBRA for health care insurance, despite the high price tag and the end of the government COBRA subsidy. One out of five terminated employees in Hewitt's analysis enrolled in COBRA coverage in June 2010--the first month where the subsidy was not available--which is almost twice as high as historical, pre-subsidy enrollment rates.

Hewitt analyzed COBRA enrollment rates for workers who were voluntarily or involuntarily terminated from their jobs since 2004. This analysis of 200 large U.S. companies, representing 8 million employees, shows that the average COBRA enrollment rate for these employees and their dependents was 21 percent in June 2010. This is significantly higher than the historical monthly average enrollment rate (12 percent) but slightly lower than overall enrollment rates during the period that the COBRA subsidy was available to involuntarily terminated employees (25 percent).

When looking only at the subset of workers who were involuntarily terminated and eligible for the COBRA subsidy, Hewitt's analysis showed the average monthly enrollment rate was 38 percent, with enrollments peaking in June 2009 at 46 percent. For May 2010--the last month that the subsidy was available--the COBRA enrollment rate for involuntarily terminated workers was 31 percent.

"With the unemployment rate close to 10 percent, more Americans have to turn to COBRA as a way to access health insurance, especially for workers who are involuntarily terminated and either don't have a new job right away, or don't have a job with an employer-provided health plan," said Karen Frost, Hewitt's Health and Welfare Outsourcing leader. "However, enrollment rates will likely decline over time, as workers can't--or aren't willing to--afford the high premiums associated with COBRA coverage. Additionally, workers who enrolled in June anticipating the subsidy would be extended may subsequently drop coverage now that it is clear they won't be able to off-set the high cost of COBRA."

Under the COBRA law, terminated workers may continue employer-sponsored health coverage by paying 100 percent of the health care premium plus an additional 2 percent to cover administrative costs. This translates to roughly $8,800 a year in COBRA health care costs for the average worker. Enacted in March 2009, the COBRA subsidy under the American Recovery and Reinvestment Act of 2009 (ARRA) required eligible employees to pay only 35 percent of the COBRA premium, or about $3,000 a year for the average worker. The subsidy lasts for up to 15 months for workers who were involuntarily terminated between September 1, 2008 and May 31, 2010.

About Hewitt Associates Hewitt Associates 

(HEW 48.63, -0.26, -0.53%) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.

 

The Affordable Care Act (ACA) requires states to either develop their own state insurance exchange, partner with other states or hand over their state insurance exchange to the federal government to run.  States are required to demonstrate to HHS they have a viable plan in place and making progress towards developing their own exchange before January 1, 2013 or risk having the federal government take control.

 

To help monitor different state legislatures, check out http://bit.ly/9gKJjD for more detailed information.

Multiple news outlets are reporting that the COBRA subsidy program instituted during the ARRA legislation of 2009 will not be continued.  The US Congress recently moved to strip out a measure which would have extended the program beyond June 1st of this year.

 

http://www.marketwatch.com/story/cobra-payment-aid-appears-likely-to-end-2010-06-06

Last night the House Ways & Means Committee finalized amendments to HR 4213 which is now referred to as the American Jobs and Closing Tax Loopholes Act of 2010.  Included within this bill is an extension of the last QE date eligible for treatment as an AEI to December 31, 2010.  We understand that the House is expected to vote on this soon, and that the Senate then intends to try to vote on it before May 31.  Details and current text of the bill can be found here http://waysandmeans.house.gov/press/PRArticle.aspx?NewsID=11185. 

We will keep you posted as we learn more.

President Obama signed HR 4851 into law on April 15 extending the eligibility date for treatment as an AEI under the ARRA to all Qualifying Events occurring on or before May 31, 2010.  The applicable portion of the Act is the following:

SEC. 3. EXTENSION AND IMPROVEMENT OF PREMIUM ASSISTANCE FOR COBRA BENEFITS.

 

(a) Extension of Eligibility Period- Subsection (a)(3)(A) of section 3001 of division B of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), as amended by section 3(a) of the Temporary Extension Act of 2010 (Public Law 111-144), is amended by striking `March 31, 2010' and inserting `May 31, 2010'.

(b) Rules Relating to 2010 Extension- Subsection (a) of section 3001 of division B of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), as amended by section 3(b) of the Temporary Extension Act of 2010 (Public Law 111-144), is amended by adding at the end the following:
`(18) RULES RELATED TO APRIL AND MAY 2010 EXTENSION- In the case of an individual who, with regard to coverage described in paragraph (10)(B), experiences a qualifying event related to a termination of employment on or after April 1, 2010 and prior to the date of the enactment of this paragraph, rules similar to those in paragraphs (4)(A) and (7)(C) shall apply with respect to all continuation coverage, including State continuation coverage programs.'.

(c) Effective Date- The amendments made by this section shall take effect as if included in the provisions of section 3001 of division B of the American Recovery and Reinvestment Act of 2009.

 

The Senate is expected to vote later today to proceed with H.R. 4851, the “Continuing Extension Act of 2010,” which would extend the end date of eligibility for COBRA premium reduction under the ARRA to April 30, 2010.  The exact language from the Bill is as follows:

 

SEC. 3. EXTENSION AND IMPROVEMENT OF PREMIUM ASSISTANCE FOR COBRA BENEFITS.
Subsection (a)(3)(A) of section 3001 of division B of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), as amended by section 3(a) of the Temporary Extension Act of 2010 (Public Law 111-144), is amended by striking `March 31, 2010' and inserting `April 30, 2010'.

 

Together with our customers, Benaissance is working to modify COBRApoint to empower customers to comply with the new requirements on behalf of their employer clients.  To learn more, please contact us at sales@benaissance.com or call 877-884-7021.

The Department of Defense Appropriations Act, 2010, extended the COBRA premium reduction eligibility period for two months until February 28, 2010 and increased the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).  In the upcoming webcast, the Department of Labor will be joined by the U.S. Department of the Treasury and the Internal Revenue Service to discuss the extension and provide assistance in complying with the new requirements, including the model notices and transition period.

If you are an employer who is trying to comply with Federal COBRA regarding your health plan, or if you are a third party administrator or a carrier with questions about the new law, this is your chance to hear from the federal regulators and have the opportunity to ask them questions.

To register go to https://compx11.eventcenterlive.com/cfmx/ec/register/reg.cfm?BID=1&RegID=284EB0ED.