COBRA Changes Effective July 2010: Pennsylvania Passes a “Mini-Cobra” Law in Response to the American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009 (“ARRA”), enacted in February, included a government subsidy for COBRA premiums for individuals who lost group health plan coverage due to an involuntary termination of employment from September 1, 2008 to December 31, 2009.  COBRA is a federal law that requires employers with 20 or more employees to offer continued health care coverage to employees, and their eligible dependents, who experience a “qualifying event” (insert fn), including involuntary termination.  Under COBRA, the employer may charge the employee up to 102% of the group health plan monthly cost.  COBRA coverage is generally limited to 18 months, but may be extended up to 36 months, in certain circumstances.

COBRA does not apply to employers with fewer than 20 employees.  As a result, many states have enacted what are often referred to as “mini-COBRA” laws, to provide COBRA-like benefits to employees who are not eligible for such benefits under federal COBRA.   Pennsylvania now has a  “mini-COBRA” law, which is effective July 10, 2009.   The PA “mini-COBRA”, which will apply to employers with more than 1 but fewer than 20 employees, differs from federal law COBRA in several respects.  Most notably, the PA law requires health care insurers, rather than employers, to make continuation coverage available to eligible terminated employees and their covered dependents.  This means that the insurer, not the employer, is responsible for sending out the required forms and notices to eligible employees and their covered dependents.  The premium for this continuation coverage may not exceed 105% of the group health plan monthly cost.

Unlike federal COBRA, the PA law applies only to insured arrangements, not self-insured programs, only requires coverage for up to 9 months, and requires insurers to offer a conversion option for an individual policy at the end of the “mini-COBRA” coverage period.  In order to be eligible for coverage under the PA law, an employee must work for an employer with fewer than 20 employees and have been covered by the employer’s group health plan for at least three months before the qualifying event occurs.  The PA law uses the same definition of “qualifying event” as COBRA does.  Under the PA law, coverage ends when the covered individual becomes eligible for Medicare or another group health plan or fails to certify that he or she is not eligible for coverage under another group health plan.

The PA “mini-COBRA” provides for a premium subsidy similar to the one contained in the ARRA.  Employees who are involuntarily terminated before January 1, 2010, and who elect to receive continuation coverage before this date, will be entitled to a 65% premium subsidy for up to 9 months.   Unlike the premium subsidy in the ARRA, the subsidy contained in the PA law requires the insurer, rather than the employer, to pay the subsidy.

The PA law will continue to apply after January 1, 2010, but the subsidy will no longer be available, unless the ARRA subsidy is extended.  In order to comply with PA’s new “mini-COBRA” law, employers must notify the plan administrator within 30 days after an employee or his or her eligible dependent experiences a qualifying event.  The eligible employee or his or her eligible dependent will then have 30 days in which to make his or her election.  Following this election, the plan administrator will have 14  days to notify the insurer of such election.

How We Can Help

We are available to answer any questions you may have regarding the COBRA provisions contained in the ARRA  or PA’s new mini-COBRA law. The model notices available on the DOL website are a good starting point, but most employers will need to revise the model notices to reflect the specific design and administration of the employer’s plans.   We are available to assist you with the preparation of these revised notices and to answer any questions you have about the COBRA requirements under the ARRA.

Please contact the Leech Tishman attorney with whom you regularly work or Ann C. Bertino at abertino@leechtishman.com.

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