Client Question: How will the ARRA affect groups under 20 employees covered by the State Mini-COBRA plan?
AnswerUnder Title III of the new American Recovery and Reinvestment Act of 2009 (ARRA), “assistance eligible” employees are entitled to a 65% subsidy for COBRA premiums for up to nine months. An assistance eligible employee is one who is (1) eligible for COBRA coverage, (2) elects such coverage, and (3) was involuntarily terminated from employment at any time on or between September 1, 2008 and December 31, 2009.

The Act defines “COBRA continuation coverage” as “coverage provided pursuant to [COBRA] or under a State program that provides comparable continuation coverage.” (emphasis added) It does not include coverage provided through a health flexible spending arrangement under a Section 125 cafeteria plan

Subsequent government publications have confirmed that that the extended COBRA benefits and subsidies under the American Recovery and Reinvestment Act of 2009 does in fact cover employers with fewer than 20 employees who are subject to a State program that provides coverage comparable to COBRA.


The American Recovery and Reinvestment Act of 2009, signed by President Obama on February 17, provides that the federal government will pay 65% of COBRA premiums for eligible COBRA participants who lose their jobs between September 1, 2008 and December 31, 2009. Employers have been awaiting the model notice from the Department of Labor to be  issued to eligible COBRA participants. The Model Notice (in alternative formats), has now been issued. The following is the formal announcement, which contains links to the notices..
COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act Of 2009
The American Recovery and Reinvestment Act of 2009 (ARRA) provides for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period.
Individuals who request the premium reduction from their group health plan, but are denied may appeal to the Department. The Department is developing a process for reviewing denials and an official application form that must be used to file an appeal that will be available shortly.
ARRA mandates that plans notify certain current and former participants and beneficiaries about the premium reduction.
The Department created model notices to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions.
Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. This full version includes information on the premium reduction as well as information required in a COBRA election notice.
 The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it. 
Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations. 
Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:
1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.
This notice includes information on ARRA’s additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.