CONNECT WITH RKG LAW

PA Mini-COBRA Law Effective July 10, 2009

July 7, 2009

If you thought that no one in Harrisburg was doing anything but wringing their hands about the Pennsylvania state budget for the last 3 months, think again! The Pennsylvania Senate and House of Representatives got together and signed Act 2 of 2009 on June 10, mandating continuing health insurance for employees of employers with fewer than 20 employees, effective July 10, 2009.

Since 1985, the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) has required employers of 20 or more employees to provide its employees and eligible dependents continuing health insurance if they experience a qualifying event.

Under COBRA, employees or their dependents are required to pay the cost, up to 102% of the employer’s cost, to continue their health insurance. In February 2009, President Obama signed the American Recovery and Reinvestment Act providing for subsidized COBRA premiums for those employees who were involuntarily terminated after September 2008. Instead of 102%, the employees only pay 35%, and the employer fronts the remainder and receives a payroll tax credit for its payment. But this plan was available only to those who were subject to COBRA, not the smallest of employers. 

On July 10, 2009, when the Pennsylvania Mini-COBRA law becomes effective, the ARRA subsidy will apply to almost all employers in Pennsylvania. Currently, employers with fewer than 20 employees are not required to offer COBRA continuation coverage, leaving employees to shop for transitional policies which may not provide coverage for pre-existing conditions, prescriptions or maternity. Now employers who sponsor group medical insurance and have 2-19 employees will be required to offer employees and their dependents the opportunity to purchase up to nine months of continuation coverage on the employers group plan. 

While Pennsylvania’s Mini-COBRA is modeled after the federal COBRA law, there are some differences:

PA Mini-COBRA

Federal COBRA

Applies to employers with 2-19 employees

Applies to employers with 20 or more employees

Requires continuation coverage for up to nine months

Coverage is generally capped at 18 months, and may extend to 36 months

Applies only to insured group major medical, hospital or surgical policies. Also, Health Savings Accounts and other medical spending accounts are treated differently.

Applies to all ERISA group health plans

Applies only to insured arrangements, not self-insured programs

Covers both insured and self-insured

Permits an employer to charge up to 105% of group rate

Provides for a maximum charge of 102%

Coverage ends when a participant becomes eligible for other coverage, a group health plan or Medicare

Coverage ends when a participant enrolls in another group plan or Medicare

The insurer is given most of the burden of compliance with this Act

The employer is ultimately responsible for compliance, including providing proper notification to eligible individuals

Individuals must have 3 months of preceding coverage to be eligible

Eligible individuals need only one day of coverage before the qualifying event