COBRA Premium Reduction FAQs

Am I eligible to receive the COBRA premium reduction?

The premium reduction is available to you or a member of your family who:

  • is eligible for COBRA continuation coverage at any time between September 1, 2008 and May 31, 2010
  • elects COBRA coverage; and
  • is eligible for COBRA as a result of an involuntary termination of employment at any time between September 1, 2008 and May 31, 2010

If you are eligible for other group health coverage (such as through a spouse's plan or a new employer’s plan) or for Medicare, you are not eligible for the premium reduction.

Electing the premium reduction disqualifies you for the Health Coverage Tax Credit.  If you are eligible for the Health Coverage Tax Credit, which could be more valuable than the premium reduction, you will have received a notification from the IRS.

The amount of the premium reduction is recaptured for certain high income individuals. If the amount you earn for the year is at least $125,000 (or $250,000 for married couples filing a joint Federal income tax return), all or part of the amount of the premium reduction may be recaptured by an increase in income tax liability for the year. If your modified adjusted gross income exceeds $145,000 (or $290,000 for married couples filing a joint Federal income tax return), you do not qualify for the premium reduction. If you think that your income may exceed the amounts above, you may wish to consider waiving your right to the premium reduction. For more information, consult your tax preparer or contact the IRS at www.irs.gov.

Note: If the employee's termination of employment was for gross misconduct, the employee and any dependents generally would not qualify for COBRA or the premium reduction.

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How do I know whether or not I have been involuntarily terminated from employment?

Involuntary termination is a termination that is at the direction of the employer. This includes employees who have been laid off or fired. Voluntary termination is a termination that is at the direction of the employee. For more details regarding voluntary and involuntary terminations, review IRS Notice 2009-27.

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How do I apply for the premium reduction?

If you were covered by an MCHCP plan on the last day of your employment, MCHCP should provide you a notice of your eligibility to elect COBRA and receive the premium reduction by mail. These materials will include forms necessary for enrollment. If you don’t receive a COBRA notice and you think you should have received one, please call MCHCP’s Customer Service Department at 800-487-0771.

I am enrolled in COBRA coverage with MCHCP and am paying premiums. If I am eligible for the premium reduction, will I receive a refund of 65% of all the premiums that I have paid since September 2008?

No. The premium reduction provisions apply only to premiums for coverage periods beginning on or after March 1, 2009. If you were eligible for the reduction but paid in full for periods of COBRA coverage beginning on or after March 1, 2009, you should receive a credit against future payments.

If I am eligible for the premium reduction, how long will it last?

Your premium reduction can last up to 15 months. However, it will end earlier if:

  • You become eligible for Medicare or another group health plan (such as through a spouse's plan or a new employer’s plan); or
  • You reach the end of your maximum COBRA coverage period

If you plan to continue your COBRA coverage after the premium reduction period, you will have to pay the full amount of the premium. Failure to do so may result in loss of COBRA coverage.

Individuals paying reduced COBRA premiums must notify MCHCP if they become eligible for coverage under another group health plan or Medicare. Failure to do so can result in a tax penalty.

Will the COBRA premium reduction be applied to my dental and vision premiums?

Yes. The COBRA premium reduction applies to your medical, dental and vision plan premiums.

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