Both the U.S. and New York State governments have recently passed legislation affecting continuation of health coverage for former employees. While the federal legislation only affects employers with twenty or more employees, the New York State legislation impacts employers regardless of size. This Alert summarizes the recent changes.
Federal COBRA Subsidy Extended
On December 19, 2009, President Obama signed the Department of Defense Appropriations Act for Fiscal Year 2010 (H.R. 3326). Among the many provisions in the Defense Act was the extension and expansion of the COBRA premium subsidy program. As we previously reported in “New Stimulus Package Creates Subsidy for Health Care Continuation Coverage” (SRZ Alert, March 9, 2009), available here, and “Department of Labor Issues Model Notices for Subsidized COBRA Premiums” (SRZ Alert, March 20, 2008), available here, the American Recovery and Investment Act of 2009 (the “ARRA”) provided that “assistance eligible individuals” (employees that were involuntarily terminated and elected COBRA) who were terminated on or after September 1, 2008, through December 31, 2009, could be subsidized at 65% of the cost of COBRA premiums for up to nine months. Under the Defense Act, an assistance eligible individual who was terminated on or after September 1, 2008, through February 28, 2010, can be subsidized for up to 15 months. The federal government will continue to subsidize 65% of an assistance eligible individual’s COBRA premium.
The following terminated employees are eligible for the subsidy:
- Any individual who is terminated after December 19, 2009, can receive subsidized coverage for 15 months.
- Any individual who is currently receiving the subsidy can receive an additional six months added on to the end of their original nine-month subsidy period, for a total of fifteen months.
- Any individual currently receiving coverage under COBRA who previously received the subsidy but exhausted their nine months of subsidized premiums. These individuals will have an opportunity to receive COBRA coverage at the subsidized rate, retroactive to the day the individual stopped receiving the subsidy, for an additional six months. If the individual paid the full COBRA price, the excess premium amount will be refunded or credited to the individual for future premium payments.
- Any individual who is currently eligible for COBRA but chose to no longer pay the COBRA premiums. These individuals will have the opportunity to have COBRA coverage restored at the subsidized rate for an additional six months, retroactive to the date the person terminated COBRA. To continue coverage, the individual must pay the 35% of premium costs by February 17, 2010, or, if later, 30 days after notice of the extension is provided by his or her plan administrator.
Employers are required to send notification of the new subsidy to anyone who is an assistance eligible individual or experienced a qualifying event on or after October 31, 2009. The notice must be given by February 17, 2010, or, if the termination occurs after December 19, 2009, within the normal time frame for providing notice of COBRA continuation coverage. Additionally, any individual who exhausted their subsidy and either stopped paying the premiums or continued to pay the full premium price must also be notified of the extension and their rights to make retroactive payments. A model notice may be forthcoming from the U.S. Department of Labor.
Amendment to and Clarification of New York State ‘Mini-COBRA’ Legislation
In our Fall 2009 Employment & Employee Benefits Developments newsletter, available here, we advised you of recent developments in both federal and New York State employment and employee benefits law. The first article in that publication discussed modifications, enacted in July 2009, to New York’s “mini-COBRA” law, which requires all group health plans, irrespective of the employer’s size, to offer continuation of group health insurance coverage. Under this new legislation, an employee (or the employee’s spouse or dependent covered under the group health plan) who is either currently enrolled or becomes eligible for continuation coverage will receive an additional 18 months of coverage, for a total of 36 months. The 36-month cap applies to all qualifying events giving rise to continuation coverage eligibility. The new legislation also permits employees who qualify for continuation coverage under the federal Consolidated Omnibus Budget and Reconciliation Act of 1985, as amended (“COBRA”), for a period of less than 36 months to be eligible to elect New York State continuation coverage for a period not to exceed 36 months, beginning on the date after their federal COBRA coverage period is exhausted. In no event will an employee receive more than a total of 36 months of coverage under either federal or state continuation coverage. Self-insured plans are not required to offer this additional coverage.
On November 19, 2009, the New York State Legislature amended the July 2009 legislation to change the date when insurers are required to offer the extended continuation coverage. Prior to the amendment, the 36- month extension applied only to insurance policies and contracts issued, renewed, modified, altered or amended on or after July 1, 2009. The November 19, 2009, amendment made the following changes:
- Any beneficiary who is enrolled in continuation coverage as of November 1, 2009, or who becomes eligible for continuation coverage on or after November 1, 2009, will be eligible for up to 36 months of continuation coverage.
- Any beneficiary who exhausted continuation coverage between July 1, 2009, and October 31, 2009, before the beneficiary’s insurance plan or contract was issued, renewed, modified, altered or amended, is now entitled to a special enrollment period during which the beneficiary can elect an additional 18 months of continuation coverage. Insurers must make “reasonable efforts” to provide written notification to beneficiaries of this special enrollment period by December 19, 2009. The beneficiary then has 60 days following the receipt of notice to elect coverage. If the beneficiary does not receive notice, the beneficiary has until May 19, 2010, to elect coverage. The additional 18 months of coverage is prospective and must take effect no more then 30 days after the employee elects continuation coverage. If there is a gap between July 1, 2009, and the date coverage begins, this time is not subtracted from the 36-month total.
- The additional 18 months of continuation coverage must be offered under all policies and contracts issued, renewed, modified, altered, or amended between July 1, 2009, and October 31, 2009.
- The additional 18 months of continuation coverage must be offered under all policies and contracts on or after November 1, 2009, regardless of whether there was a renewal, modification, alteration or amendment to the policy or contract. We will continue to track this legislation for future changes and clarifications, and update you accordingly.