The American Recovery and Reinvestment Act of 2009 (ARRA) provides a reduction in the health insurance premiums for coverage provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) to workers who are involuntarily terminated. In particular, workers who are involuntarily terminated during the period from September 1, 2008, to December 31, 2009, are eligible and pay only 35 percent of the full COBRA premiums for health insurance coverage for themselves and their families for up to 9 months. The remaining 65 percent of the premium is reimbursed directly to the employer, plan administrator, or insurance company through a payroll tax credit. If the credit amount is greater than the taxes due, then the IRS will credit or refund the excess as if it were an overpayment of payroll taxes.
In the NIPAs, the COBRA premium reduction is treated as a federal government social benefit payment to persons. This classification recognizes that the federal government is providing health benefits to individuals eligible under this ARRA provision. This treatment is similar to how BEA handles other health care benefits, such as Medicare benefit payments.
The COBRA premium benefits began in the first quarter of 2009, however, BEA began recording these transactions beginning only in the third quarter of 2009; under BEA's revision schedule, the preceding two quarters are not currently open for revisions. Transactions that took place in the first and second quarters of 2009 will be included in the annual revision of the NIPAs scheduled for July 2010. Preliminary estimates of the COBRA premium subsidies are based on Office of Tax Analysis estimates from www.Recovery.gov.
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