COBRA Subsidy Final (state and 125 Plans)

[Dave020]

I just received the current IRS guidance from Conexis regarding COBRA subsidy and there are a couple of things in it that should be of interest.

1. Any plan with a Flexible Spending Arrangement (FSA) under section 106(c) offered under a Section 125 Cafeteria plan is exempt from having to provide the 65% COBRA subsidy to qualified beneficiaries. HRAs are not exempt.

2. State continuation programs, even if limited to only a few months, still will require the subsidy to qualified beneficiaries. The health insurer is the only entity allowed to take the tax credit, never the employer even in a situation where the employer handles the premiums on behalf of the beneficiary and submits the full amounts to the health insurer.

 

[Bob_The_Insurance_Guy]

ARRA

 

[bluemarlin08]

I know it is irrelevant to most, but my family went on COBRA in April 2008, I don't understand why all on COBRA aren't offered this subsidy, wonder why Sept 2008 was chosen as the beginning date? I was hoping I could get some of that "change" Barry offered.

 

[djs]

Same reason I can't refinance my house.... I'm left with change while someone else gets my dollars.

 

[Dave020]

The thing that caught my eye on this is the FSA exemption. Wasn't there some guy on here last year going on about how AFLAC is the #1 provider of FSA and 125 plans in the market?

What are the worksite VB agents going to do when the beneficiary finds out that they just lost their 65% COBRA subsidy (or mini-COBRA subsidy) because of the agent who sold them the cancer policy and had the boss set up the 125 Cafeteria plan?

It reminds me of the time at a NAHU event where I asked the BenElect speaker if his program screws up the AB 1401 Cal-COBRA extension to get 36 months. His answer, "I don't know." The real answer, their HD plan falls under self-funded and is exempt. BenElect screwed a lot of beneficiaries out of the second 18 months of continuation (read forced onto HIPAA) and did not use HRA at that time to offset the high deductibles.

 

[djs]

What are the worksite VB agents going to do when the beneficiary finds out that they just lost their 65% COBRA subsidy (or mini-COBRA subsidy) because of the agent who sold them the cancer policy and had the boss set up the 125 Cafeteria plan?

While I agree... I hate to think we are responsible for changes in rules that might come up in the future.

If you've been in insurance for any length of time, you've done something that if you had a better crystal ball you wouldn't have done.

Especially in something like this. Someone explain to me why FSA/125 plans are exempt. I couldn't have seen that coming.

Dan

 

[Dave020]

Hope everyone had a good holiday weekend. Now, back to work!

DJS, you missed my point. I am not talking about looking backward. No one can predict what changes in the future might affect something set up in the past.

My point was, if 90%+ of your revenue comes from writing FSA/125 and VB, looking forward how does one adjust to this change if the primary income generating activity now renders the plan exempt from the subsidy?

Also, when this becomes well-known, will this encourage employers to set up FSA/125 plans in order to bypass the subsidy?

 

[somarco]

I have been in the dark, literally, for two days. No power, phone, internet.

I still want to review this. This is a powder keg if true, and no Dave, I am not doubting you. Your take on things is always on the mark. I just want to see if there is a different interpretation.

The folks in Congress never read this stuff, much less research it, before passing the laws. No reason to believe this was any different.

 

[Dave020]

Here is the document I received from Conexis, you will find that FSA/125 statement at the bottom of page three under "Coverage Eligible for Premium Reduction".

http://www.wordandbrown.com/inbox/newsletters/CONEXISComplianceUpdate_IRSARRAGuidance.pdf

Note it goes onto page four and specifically differentiates between 125/FSA setups versus HRA setups (HRA are not exempt).

 

[DT1970]

Note: I am on COBRA and my healthcare policy had FSA (which I was subscribed to).

My previous employer either opted to pay anyway or there's more to this? If the FSA exemption to COBRA is true, there's going to be ALOT of hurting people who were banking on this thing. I was pretty freaked out reading the original post until Conexis told me I was all set.