A new law requires New York employers with insured medical plans to change their practices for the provision of post-employment health coverage. New York employers with 20 or more employees have, until now, been required to comply with federal COBRA, but not with New York state law, when making continued medical coverage available after a job loss or other qualifying event. Employers with fewer than 20 employees were subject to New York’s separate “mini-COBRA” law that was enacted earlier this year. However, the rules changed at the end of July 2009; employers with 20 or more employees must now accommodate coverage continuation rights granted by recent amendments to the New York Insurance Law regardless of the number of employees. In some cases, the changes may be retroactive to July 1, 2009.
Employers should try to coordinate the new rules with any applicable federal COBRA requirements and make sure that their summary plan descriptions, election forms and other communications given to terminated employees accurately reflect the new extended periods for coverage. The new law creates special challenges for multi-state employers and also for employers with both self-funded and insured plans at one or more worksites; these employers must follow different rules for their New York insured plans and must also decide whether to voluntarily extend these rights to the self-funded plans.
Post-Employment Coverage Period Extended to 36 Months
New York law will now provide for a continuation coverage period up to 36 months following a job loss, which is double the period provided under federal COBRA if there is no other qualifying event. Unlike the subsidy provisions of the American Recovery and Reinvestment Act of 2009 (ARRA) which extend special rights only if employment has been involuntarily terminated, the New York law applies regardless of the reason for the job loss. This provision is intended to permit qualified beneficiaries who have exhausted their federal COBRA continuation rights to elect up to an additional 18 months of continuation coverage under New York policies.
The new continuation coverage requirements are effective for contracts issued, renewed, modified or amended after June 30, 2009.
Longer Coverage Options for Unmarried Children
The new law requires insurers to offer employers a dependent coverage option permitting unmarried children who are not covered by an employer or government plan (such as Medicare) to continue to be covered under a parent’s group health insurance policy through age 29, regardless of financial dependence. The typical policy before this change provided that such children became ineligible for coverage on college graduation or attainment of an earlier age, such as age 23. The employer is not required to offer or pay for this coverage; but, if the employer elects not to include this option in its plan, the insurer must make available the option to purchase this coverage during statutory election periods, including during open enrollment.
The new dependent requirements are effective for contracts issued, renewed, modified or amended after August 31, 2009.
Employer Action Plan
Employers will need to decide whether to provide optional dependent coverage. They will also have to use their best efforts to coordinate the New York and federal COBRA requirements applicable to them to make sure that they provide elections at the proper times and describe the election rights accurately in the absence of guidance clarifying the interaction between the two laws. Employers with operations in New York and other states may wish to develop special New York notices of continuation coverage. It is also important to consider whether these new rights impact any provisions of an employer’s cafeteria plans or other related benefit plans not directly covered by the new law. Finally, employers with both insured and self-funded plans should consider the cost implications (including possible adverse selection) of extending COBRA coverage voluntarily under their self-funded plans.
Although it is possible that this new law might be challenged as preempted to the extent that it applies to employers subject to federal COBRA, there is an exception to preemption for state laws regulating insurance. Since it is unlikely that any challenge would be resolved before compliance is required and it is unclear whether such challenge would succeed, we recommend that preparation for compliance start now.