COBRA Subsidy Challenge Gets Derailed

April 29, 2010 ( – A federal judge in Washington has ruled that employees suing to force an employer to allow a Consolidated Omnibus Budget Reconciliation Act (COBRA) health care coverage premium subsidy must first go through all applicable administrative procedures.

U.S. District Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia ruled that the American Recovery and Reinvestment Act of 2009 (ARRA) states that its COBRA-related  provisions should be treated as though they are part of the Employee Retirement Income Security Act (ERISA). Since ERISA contains similar administrative remedies limits, Collyer asserted, then claims under ARRA should be handled similarly.

Collyer pointed out that the U.S. Department of Labor (DoL) has provided guidance on its Web site and directs individuals denied the COBRA subsidy to complete an “Application for Review of Denial of COBRA Premium Reduction.” DoL advises that the department will act on any application within 15 days of getting the document.

Workers who lost their jobs and who were eligible for health insurance coverage under COBRA between September 1, 2008, and December 31, 2009, were eligible for a 65% reduction in their COBRA premiums, due to ARRA. The subsidy portion was later extended to cover workers who lose their jobs and become eligible for COBRA benefits anytime before May 31, 2010.

According to the court, Debra Dorsey contacted the DoL for help in getting the subsidy but did not fill out the application before suing the former employer over the issue. The former employer, Jacobson Holman PLLC, denied her request for a reduction in the COBRA premiums , saying she voluntarily left the company and was not eligible for the subsidy.

The case is Dorsey v. Jacobson Holman PLLC, D.D.C., No. 09-1085.