The Minnesota Legislature was busy in the month of May, and among the laws passed were several dealing with group health insurance.
Extended Minnesota Continuation Coverage Election Period
Senate File 1904 provides for an extended period of time for those individuals who would be considered assistance eligible individuals (AEIs) under the American Recovery and Reinvestment Act of 2009 (ARRA) to elect continuation coverage. (AEIs are certain individuals whose group health plan coverage ended as a result of an involuntary termination of employment between September 1, 2008, and December 31, 2009, and who are entitled to a federal subsidy of 65% of the cost of COBRA continuation coverage. For more information, see our Compensation and Employee Benefits Alert dated February 20, 2009.) The law applies to fully insured group health plans in Minnesota, even those that are not subject to federal COBRA requirements. The extended election period ends 60 days after the individual is provided notice of the extended election right. The coverage provided under the second election is retroactive to February 17, 2009, and will end no later than 18 months after the individual’s original right to elect continuation coverage arose (i.e., the date of loss of coverage). Employers should coordinate with their insurers and/or legal counsel to determine if the second election period applies to them and whether additional notice must be provided to individuals who terminated employment before the effective date of the law (May 7, 2009).
Minnesota Picks Up Remaining Continuation Coverage Cost for Certain Individuals
In an effort to limit costs under certain state subsidized medical programs, the legislature enacted a law (learn more here) to pay for the remaining 35% of the cost of continuation coverage for some AEIs who would otherwise be eligible to enroll in state medical programs for low-income Minnesotans. Under the law, an AEI eligible to enroll in certain state subsidized medical programs would apply for and benefit from the 65% federal subsidy, and during the same period, Minnesota would pay the remaining 35% of the individual’s premium cost to the employer sponsoring the group health.
How the law will be implemented remains unclear. The language requires the Department of Human Services (DHS) to pay the 35% directly to the entity responsible for collecting continuation premiums, but does not describe how the payment will occur; nor is it clear that DHS will be able to coordinate coverage in time to allow qualified AEIs to elect COBRA and pay the first premiums. AEIs have only 45 days after a COBRA election to pay for that coverage and the state subsidy may not be available by that date. The law does not contemplate direct reimbursement to individuals who may have already paid the 35% to qualify for the federal subsidy. Therefore, the law may not be effective in extending COBRA coverage to these AEIs.
The law also requires employers and administrators who are required to provide notice under ARRA to provide an additional notice to Minnesota resident employees of the availability of the state subsidy. It is not clear whether this notice must be provided only to those whom the employer believes may be eligible for the additional subsidy, or all AEIs. ERISA may also preempt the notice requirement, although employers may decide to comply with it anyway, and government and church plans are not subject to ERISA and must therefore provide the notice. The law is effective for payments made with respect to periods of coverage beginning on or after July 1, 2009. Additional guidance, including a model notice, is expected from the Department of Human Services.
Small Group Health Plans Must Notify Insurer of Employee’s Termination/Layoff Within 10 Days.
A Minnesota employer maintaining a fully insured group health plan, other than a plan subject to federal COBRA requirements or a multiemployer plan, must notify its insurer, HMO or other health carrier of a covered employee’s layoff or termination from employment within 10 days after the termination or layoff event (learn more here). The insurer or HMO must then provide the individual with notice of the above-described extended election period and other federal subsidies for continuation coverage within 30 days after the employer informs the insurer of the event. The effective date of this provision is May 22, 2009. The requirement of the insurer to provide notice regarding the extended election period should apply only for those AEIs who had not elected continuation coverage by February 17, 2009, since only they are eligible for the extended period; this notice requirement will not be relevant after such time. The insurer or employer should already be providing notice of the federal subsidy to any new AEIs after that date, and this information can be added to the federal subsidy notice. Again, there is an argument that the state notice requirement may be preempted by ERISA.