Pennsylvania Enacts "Mini-COBRA" requiring Insurers to offer Continuation of Health Coverage Options for Employees of Small Businesses

Posted on June 24, 2009 by Michael Moore

Effective July 10, 2009, medical insurers covering small employers in Pennsylvania will be required to offer COBRA-like continuation coverage to qualified employees and their eligible dependents. The new law covers small employers who have between two and 19 employees on a typical business day during the preceding calendar year. 

The so-called mini-COBRA coverage expands on the federal COBRA law that covers employers with at least 20 employees and allows employees who are involuntarily terminated to qualify under a federal economic stimulus law for a 65% federal subsidy of both COBRA and mini-COBRA premiums.

Like the federal law, qualifying events for coverage under the new Pennsylvania mini-COBRA are loss of group coverage due to termination of employment, death, divorce or marital separation. However, there are some key differences between the federal COBRA  and Pennsylvania’s mini-COBRA law, some of which are as follows:

  • Under the Pennsylvania law, an employee or dependent must have been continuously covered by medical insurance for three months prior to termination of coverage and may not be covered or eligible for coverage under another medical plan or Medicare.
  • Under the Pennsylvania law, continuation coverage must be extended for nine months; under federal COBRA law, coverage is available up to 18 months when employment is terminated and 36 months in situations involving death, divorce or legal separation.
  • Under the Pennsylvania mini-COBRA law, beneficiaries can be charged a premium up to 105% of the group rate; federal COBRA beneficiaries can be charged a premium of up to 102% of the group rate.
  • Pennsylvania mini-COBRA obligations apply to insurers; federal COBRA applies to employers that provide medical coverage through self-insurance or insurance products.

Employers and insurers will need to provide notices to employees and dependents of the provisions of the new law as well as their rights to elect continuation coverage upon the occurrence of a qualifying event.

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Important IRS clarification of COBRA Subsidy Provisions

Posted on April 1, 2009 by Michael Moore

On March 31, 2009, the IRS issued a notice relating to premium assistance for COBRA continuation coverage under the American Recovery and Reinvestment Act of 2009 (ARRA). Notice 2009-27 contains many helpful clarifications on the following topics:

  • INVOLUNTARY TERMINATION
  • ASSISTANCE ELIGIBLE INDIVIDUAL
  • CALCULATION OF PREMIUM REDUCTION
  • COVERAGE ELIGIBLE FOR PREMIUM REDUCTION
  • RECAPTURE OF PREMIUM ASSISTANCE
  • PAYMENTS TO INSURERS UNDER FEDERAL COBRA
  • COMPARABLE STATE CONTINUATION COVERAGE

The Q&A section answers many nagging questions particularly on "involuntary termination" eligibility including the following as meeting the definition:

  • An involuntary termination means any severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services (this leaves in question where employees accepting a "voluntary layoff" may qualify).
  • Any temporary layoff with recall rights qualifies as a termination, but a reduction in hours does not qualify. However, an employee’s voluntary termination in response to an employer-imposed reduction in hours may be an involuntary termination if the reduction in hours is a material negative change in the employment relationship for the employee.
  • Any termination elected by the employee in return for a severance package.
  • Any employee-initiated termination from employment constitutes an involuntary termination from employment for purposes of the premium reduction if the termination from employment constitutes a termination for good reason due to employer action that causes a material negative change in the employment relationship for the employee.

Employers should be complying with the Notice requirement of the ARRA before April 18, 2009.

 

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