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August 02, 2010
COBRA Continues to Raise Questions
The more that Congress extends subsidies for unemployed workers' health coverage premiums, the more our subscribers come forth with questions about who does and doesn't qualify, and under what circumstances. Here are some of the most recent questions, and summaries of the answers our legal experts provided.

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Q: Can an employer choose to pay a former employee's entire COBRA premium if the individual wasn't eligible for the subsidy under the American Renewal and Recovery Act (ARRA) or the subsidy has expired?

A: Yes. The only downsides we can see are the added costs and the potential for discrimination if any employer chooses to do this for some former employees but not others.

Q: If an active employee dies, is his or her surviving spouse eligible for the ARRA subsidy for COBRA?

A: In short, no. In these circumstances, death is not an involuntary termination of employment that qualifies for the subsidy. But the spouse may be eligible for 36 months of COBRA coverage.

Q: We have just offered coverage under our healthcare plan to a new employee. But it seems he has subsidized continuation coverage from his former employer under COBRA. And, since he’s already satisfied the COBRA deductible, he wants to stay on that plan and not participate in our plan until the COBRA runs out. Can he do that?

A: The conditions that terminate the subsidy are stricter than those for terminating COBRA coverage. In fact, subsidy coverage ends for an assistance-eligible individual for the first coverage month after he or she is eligible for coverage under any other group health plan. If the individual currently has dental and/or vision coverage under COBRA and your plan offers only medical coverage, he or she may not even maintain COBRA subsidized coverage for dental or vision.

Q: If an individual was laid off before 5/31/2010 and received 6 months’ paid COBRA coverage as part of his or her severance, is the person eligible for the subsidy? If so, for how long?

A: IRS has said that months when the former employer pays the full COBRA premium count against the 15-month subsidy period if the plan measures the 18-month maximum required period of COBRA coverage from the date when the individual was involuntarily terminated. So the former employee in your question would be eligible for 9 months' of the subsidy for as long as he or she remains an assistance-eligible individual.

Q: What’s the definition of ‘gross negligence’ if we want to use that as a reason not to offer a former employee either COBRA or state continuation?

A: Neither gross misconduct nor gross negligence is defined under the statute or the regulations, and the experts have reached no consensus on the question. Opinions vary from a requirement that the individual have committed a proven criminal offense all the way down to the violation of a company policy. Congress indicated that firing someone “for cause” wasn’t enough, but what is enough is unclear. One court case defined it as misconduct that is “intentional, wanton, willful, deliberate, reckless, or in deliberate indifference to an employer’s interest.” Since COBRA penalties are severe, we strongly recommend that you seek the help of a qualified attorney.

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