On June 10, Gov. Edward G. Rendell signed into law a Pennsylvania “mini-COBRA” bill that will provide for continued health insurance in a manner comparable to the federal COBRA law for employees of small employers in Pennsylvania. The new law will have two important effects. First, it will require small employers’ group health plans that are not subject to the federal COBRA law (those employers with between two and 19 employees) to offer continued group health insurance to employees and qualified dependents of employees who experience a qualifying event, including death of a covered employee, termination of a covered employee’s employment (other than for the employee’s gross misconduct) and a spouse’s divorce or legal separation from the covered employee. Such continuation coverage must be offered at the same level of benefits that the employee received prior to the qualifying event, and for a period of up to nine months from the date of the qualifying event. Coverage will be offered at the employee’s or the qualified dependent’s expense (up to 105 percent of the normal cost of coverage).
The law will exclude from continuation coverage any individual who was not covered by the employer’s group health plan for at least three months prior to the qualifying event; who is eligible for coverage under Medicare; or who is, or could be, covered by another group health insurance arrangement.
Second, and perhaps more importantly, the Pennsylvania mini-COBRA law will enable covered individuals to take advantage of the premium subsidy provisions of the American Recovery and Reinvestment Act of 2009, or ARRA. Under ARRA, any employee of a small employer who becomes entitled to continuation coverage under the Pennsylvania mini-COBRA law by virtue of his or her involuntary termination from employment will be entitled to a federal government subsidy of 65 percent of the premiums for the coverage, so long as the employee pays the remaining 35 percent. An employee will only be eligible for the subsidy if his or her employment termination occurs after the effective date of the new law, which, according to the text of the bill, will be the 30th day after signature by the governor – or July 10 – and before Jan.1, 2010. Therefore, an employer may wish to defer the employment termination of an employee until the expiration of 30 days following the governor’s signature to allow the employee to receive the subsidy.
The new law includes notification requirements applicable to employers, employees and dependents, plan administrators and insurers. The group policy must provide notice of the new law to policyholders within 45 days of the effective date of the law. Employers of covered employees must notify the employee or dependent, the insurer and the plan administrator (unless, obviously, the plan administrator is the employer) of a qualifying event (and, for the employee or dependent, his or her rights under the law) within 30 days of the qualifying event. The covered employee or eligible dependent must notify the plan administrator of his or her election of coverage within 30 days of receiving the notice of rights from the employer.
Employers with between two and 19 employees should review the requirements of the new law and revise their policies to ensure compliance.
Ryan J. Fleming, a member of Stradley Ronon Stevens & Young's employment and labor practice group, focuses on employment litigation including discrimination and wrongful discharge claims and counsels employers on a variety of employment-related issues. As co-chairman of Stradley Ronon’s employee benefits & ERISA practice group, James Podheiser advises for-profit and not-for-profit organizations and individuals in the areas of employee benefits law, deferred compensation arrangements, stock plans, employee vs. independent contractor issues and all aspects of ERISA. Blog postings are not legal advice and do not create an attorney-client relationship. Materials posted here represent the views of the poster or commenter and not the views of Stradley Ronon Stevens & Young, LLP or its clients.
Ryan J. Fleming
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Stradley Ronon Stevens & Young, LLP
www.stradley.com
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