On February 17th, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“the Act”). The Act makes significant changes to the COBRA continuation rules. The Act, which is generally effective March 1, 2009, provides for a government-funded COBRA continuation premium subsidy for eligible individuals for a maximum of nine (9) months. As a result, all employees involuntarily terminated from employment are eligible for the 65% premium subsidy, which means that COBRA participants only pay 35% of the required COBRA premium. Unbeknownst to many, the new Act also applies to employers groups with less than 20 employees.
The new Act defines COBRA Continuation Coverage to mean, among other things, coverage provided "under a State program that provides comparable coverage.” Approximately 44 states have adopted a "mini-COBRA" program. Generally, these mini-COBRA programs mirror the federal COBRA coverage requirements. However, the eligibility and the length of coverage may be different. For example, the New York mini-COBRA law allows for 18 months of continuation coverage. In contrast, the Illinois mini-COBRA law allows for 9 months of continuation coverage.
The Illinois mini-COBRA law applies to fully insured plans and HMOs. Coverage must be offered to the employee and his or her dependents who were continuously covered under the group plan for three months prior to the termination of employment. Continuation coverage can last for a period of up to 9 months. Upon termination of employment, the employer must notify the employee in writing of his or her rights to continue coverage. The terminated employee must request such continuation in writing within the 10 day period following the later of: (1) the date of employment termination; or (2) the date the employee is given written notice of their right to continuation coverage.
Although the new Act provides fairly clear guidance and requirements to employer groups with 20 or more employees, Frank Del Barto notes that the Act is not very clear on which provisions apply to employer groups with less than 20 employees. For example, the Act indicates that the premium subsidy applies to all COBRAeligible employees who have been or will be involuntarily terminated from employment between September 1, 2008 and December 31, 2009. This provision requires employers with 20 or more employees to contact terminated employees, inform them of the premium subsidy and provide them with either: (1) a second COBRA election period or (2) a premium reduction credit. For employers with less than 20 employees, the Department of Labor’s initial guidance indicates that whether or not an employer with less than 20 employees must provide the special election period is an individual state decision. As a result, Frank recommends that all employers with less than 20 employees contact their group medical insurance company and/or insurance broker as soon as possible to determine how the new Act will be administered in your particular state.