COBRA is a federal law that requires employers with 20 or more employees to offer continuing health care coverage to former employees. Employees with fewer than 20 employees are exempt from COBRA. However, states are allowed to enact laws that go further than the federal law. Pennsylvania has done just that. On June 10, Gov. Edward G. Rendell signed into law a Pennsylvania “mini-COBRA” bill that will require small employers with 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, much the same way as COBRA now requires of larger employees, for a period of up to nine months from the date of termination of employment or other qualifying event. Like COBRA, 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.
Additionally, the Pennsylvania mini-COBRA law will enable covered individuals to take advantage of the 65% premium subsidy provisions of the American Recovery and Reinvestment Act of 2009, or ARRA. However, 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, employers may wish to consider deferring 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.
Similar to COBRA, the new Pennsylvania law includes notification requirements applicable to employers, employees and dependents, plan administrators and insurers. Additionally, each small employer’s group policy must provide notice of the new law to policyholders within 45 days of the effective date of the law. Employers in Pennsylvania who have between two and 19 employees should review the new law and revise their policies as necessary to ensure compliance.
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