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Pennsylvania Small Employers Must Provide State Mini-COBRA Coverage

  • June 18, 2009

The American Recovery and Reinvestment Act of 2009 (“ARRA”) amended the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) to provide a federal premium subsidy for certain individuals who lose group health coverage in connection with an involuntary termination of employment on or after September 1, 2008.  In addition, the ARRA extended the premium subsidy to individuals who were covered under a small health plan not subject to COBRA but subject to state law mandating certain continuation coverage (commonly referred to as “mini-COBRA”).   In response to the ARRA, the Pennsylvania General Assembly established a mini-COBRA law and coordinated it with the ARRA to allow individuals in Pennsylvania to take full advantage of the federal subsidy.  On June 10, 2009, Governor Edward Rendell signed Act 2 of 2009, Pennsylvania’s mini-COBRA law, which includes new group health plan continuation coverage requirements affecting small employers.

What does the new Pennsylvania mini-COBRA law provide?

Group health plans sponsored by employers that generally employ from two to 19 employees will be subject to the new mini-COBRA requirements.  Prior to this, only those who worked for companies employing at least 20 people were eligible for federal COBRA benefits.  Covered group health plans will be required to provide continuation coverage to eligible individuals for a period of up to 9 months. 

Generally, an individual will be eligible for continuation coverage under the new mini-COBRA law if he:

  1. has a qualifying event (i.e., termination of employment, death, divorce, Medicare eligibility, and loss of dependent status);
  2. had been covered under the small employer’s group health plan for the three months prior to the qualifying event; and
  3. is not eligible for or covered under Medicare or other private group health insurance.

The mini-COBRA law has specific notice requirements that apply to employers, employees (and their dependents), and insurers.  Thus, employers subject to the mini-COBRA law will need to coordinate with their insurance provider and, if applicable, administrator(s), to comply with these requirements.

Among the notice requirements are:

  1. The group policy must provide notice of the new law to policyholders within 45 days of the effective date of the law.
  2. Employers must provide notice to individuals of their rights to continuation coverage with 30 days of a qualifying event. 
  3. Individuals must notify the employer (or administrator, if not the employer) of their  election for continuation coverage within 30 days of receiving the notice from the employer. 

An eligible individual who elects to continue group health coverage under the mini-COBRA law will be required to pay up to 105% of the group rate for continuation coverage.

The law takes effect on July 10, 2009.

Coordination of Pennsylvania mini-COBRA with ARRA

The ARRA provides that “assistance eligible individuals” are entitled to a 65 percent subsidy of the regular premium amount the former employee would otherwise be required to pay to maintain coverage.  This subsidy generally applies to individuals who experienced an involuntary employment termination from September 1, 2008 through December 31, 2009.  The subsidy lasts for up to nine months from the time of termination.

Small employers are not obligated to pay any portion of the premium subsidy; rather, the insurance company will claim the credit from the IRS for the 65 percent of the premium that is not paid by the former employee. Other (larger) employers generally have to cover the 65 percent subsidy, and then claim the credit.

The Pennsylvania mini-COBRA law allows individuals who have an involuntary termination of employment between the effective date of the new law and December 31, 2009, and who qualify, to take advantage of the 65 percent subsidy.

Jackson Lewis attorneys are available to answer employer questions regarding rights and responsibilities under COBRA, the American Recovery and Reinvestment Act of 2009 or Pennsylvania mini-COBRA.

©2009 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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