THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

(ARRA) -STIMULUS

1

Presented By:Terrence P. Frett, CEBS, CLU, CPCU, REBC, RHUFrett/Barrington Limited

COBRA DEFINED

20 or more employees

More than 50% of previous calendar year

Part-Time count as a fraction of full time

Includes Group Health, Dental, Vision, HRA and FSA

Normal duration 18 months

Charge 102% of premium

2

STATE OF WISCONSIN CONTINUATION

DEFINED

All fully insured employer groups (2+ employees)

State Resident

18 months duration

Charge 100% of premium

Medical coverage only

3

NEW PREMIUM SUBSIDY

Effective date: Health coverage beginning on or after February 17, 2009. Generally March 1, 2009

Subsidy Amount – Assistance Eligible Individual (AEI)

AEI pays 35% of premium

Government subsidizes 65% of premium

Subsidy Duration: Whichever occurs first

9 months or eligibility for other group coverage (or Medicare)

4

NEW PREMIUM SUBSIDY CONTINUED

Income Limitations:

Individual Filers:

$125,000 - $145,000 income tax increase by percentage of the COBRA subsidy

$145,000 + income tax increase by total amount of subsidy

Joint Filers:

$250,000 - $290,000 income tax increase by percentage of the COBRA subsidy

$290,000 + income tax increase by total amount of subsidy

5

ASSISTANCE ELIGIBLE INDIVIDUALS

Eligible for COBRA as a result of the employee’s involuntary termination between September 1, 2008 – December 31, 2009

Eligible for COBRA continuation (state also) at any time between September 1, 2008 – December 31, 2009

Elects Cobra coverage

Involuntary Termination of Employment

Other than gross misconduct

Bill does not define “involuntary”

Does this apply to employees that agree to retire early?

Full-time to part-time (reduction in hours) does not qualify

Dependent child loses eligibility - (ex. graduated from college) does not qualify

6

ASSISTANCE ELIGIBLE INDIVIDUAL

John was Involuntary Terminated and offered COBRA

November 1, 2008

Declined COBRA when offered for him and his family

Now has a second enrollment opportunity

Eligible for subsidy March 1, 2009

Elects Cobra under second enrollment March 1, 2009

Only has 14 months of COBRA available

Full Cobra Rate $1,000

John pays $350

Employer offsets payroll taxes $650

7

ASSISTANCE ELIGIBLE INDIVIDUAL

John was Involuntary Terminated and offered COBRA

November 1, 2008

John elected Cobra for his family and began paying the $1000 month COBRA premium

John qualifies for the premium subsidy effective March 1, 2009

Employer still bills John $1,000 premium for March and April 2009

Employer notifies John of the subsidy and applies $1,300 credit against future Cobra premiums or refunds the credit

Once the subsidy is communicated John only pays $350 (35%) going forward. Employer takes payroll tax credit

John does not qualify for any refund during November 1, 2008 thru February 28, 2009

8

ASSISTANCE ELIGIBLE INDIVIDUAL

John was Involuntary Terminated and offered COBRA November 1, 2008

John elected Cobra for his family and began paying the $1,000 monthly COBRA premium

January 1, 2009 John stopped paying because he could not afford the $1,000

John has a second enrollment opportunity for coverage March 1st.

Eligible for subsidy March 1st

9

COBRA VS STATE CONTINUATION

COBRA or Self Insured STATE CONTINUATION

Includes 2nd enrollment opportunity

Will decide if they will require second enrollment (OCI still looking into this since DOL just made this optional in a March 2nd release)

Employers will have to recoup the subsidy through offset on payroll taxes

Appears the insurance carrier will have to recoup the subsidy through payroll taxes

Medical, Dental, Vision, and HRA

Medical only coverage

Same subsidy amount of 35%

10

PREMIUM SUBSIDY

Cobra subsidy amount claimed on Employer’s Quarterly Federal Tax withholding Form 941

Employer is not obligated to follow Cobra/State Continuation. Only the insurance carrier will recover subsidy

11

12

WHAT IF EMPLOYER PAYS A PORTION OF COBRA

BASED UPON SEVERANCE PACKAGE?

Example: Bob (involuntarily) terminated on January 1, 2009 and was offered COBRA on February 1, 2009

Former employer offers to pay 50% of COBRA for 3 months for Bob

Monthly COBRA cost is $1,000 for Bob’s family coverage

13

WHAT IF EMPLOYER PAYS A PORTION OF COBRA BASED

UPON SEVERANCE PACKAGE? CONTINUED

14

February Bob pays $500 / Company covers $500

March Bob pays $175 (35% of $500) / Company pays $500 /Company recovers $325 subsidy

April Same as March

May Bob pays $350 (35% of $1,000) /Company recovers $650 subsidy

EMPLOYER OBLIGATIONS

Identify eligible terminated employees (September 1, 2008 – current)

Prepare and send out notices

Currently on COBRA - new subsidy

Not on COBRA – The second enrollment opportunity and subsidy

Notices must include:

The forms necessary for establishing eligibility for subsidy

The name, address, and phone number of the plan administrator and any other person maintaining relevant information in connection with the subsidy

A description of the extended election period (the second 60-day election period)

A description of the qualified beneficiary’s obligation to notify the plan if he or she becomes eligible for coverage under another group health plan or Medicare and the penalty for failure to notify the plan

15

EMPLOYER OBLIGATIONS CONTINUED

A description, displayed in a “prominent manner,” of the qualified beneficiary’s right to reduced premium and any conditions on entitlement to the reduced premium

A description of the election of different coverage option described above (if the employer chooses to offer this option of AEIs

Notices must be sent 60 days from enactment (February 16th, 2009)

DOL model notice: within 30 days from enactment (February 16th, 2009)

16

EMPLOYER’S MUST MAINTAIN FOLLOWING

RECORDS FOR SUBSIDY Information on the receipt, including dates and amounts, of the assistance

eligible individuals’ 35% share of the premium.

In the case of an insured plan, copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA.

In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals.

Attestation of involuntary termination, including the date of the involuntary termination (which must be during the period from September 1, 2008, to December 31, 2009), for each covered employee whose involuntary termination is the basis for eligibility for the subsidy.

Proof of each assistance eligible individual’s eligibility for COBRA coverage at any time during the period from September 1, 2008, to December 31, 2009, and election of COBRA coverage.

A record of the SSN’s of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for 1 individual or 2 or more individuals.

Other documents necessary to verify the correct amount of reimbursement.

17

MISCELLANEOUS

Gap from 1st COBRA offering and second COBRA offering will not count toward 63 day gap for HIPAA

COBRA beneficiaries who pay full premiums for March and April (prior to notice) must be given

Refund

Credit toward future premiums

18

STATE OF WISCONSIN LEGISLATIVE UPDATE

Badger Choice – Not part of the budget – may be introduced as a bill

Healthy Wisconsin – May be introduced as a bill

New Bills on Fast Track

2 New Mandates Cochlear ear implant for kids under 18

Autism mandated

19

FEDERAL LEGISLATIVE UPDATE

$634 billion allocated in President Obama’s budget for healthcare reform. The goal is to have Congress create the plan

A summit was held on March 5th. His objective is to set up a systemic health reform plan by the end of 2009

Forums to be held at:

California, Iowa, Michigan, North Carolina and Vermont

20