Also published in the Bucks County Courier Times at: http://www.buckscountycouriertimes.com/blogs/lbccc/federal-cobra-or-pa-mini-cobra-now-is-the-time/article_92487b40-a7ec-592d-853a-a6fd38590fea.html
And in The Intelligencer at: http://www.theintell.com/blogs/lbccc/federal-cobra-or-pa-mini-cobra-now-is-the-time/article_49fad099-c69b-51a8-90d1-daa565a5eddd.html
Employers with close to 20 employees should re-evaluate their obligations regarding group health plan continuation coverage. For employers whose employee count during the past year crossed above or below the 20 employee threshold, evaluating responsibilities under federal and applicable state law(s) can help avoid offering too much or too little continuation coverage and costly penalties associated with plan administration errors.
The federal law known as COBRA (Consolidated Omnibus Budget Reconciliation Act of 1986, and related amendments) provides certain former employees (and other qualified beneficiaries), the right to temporarily continue health coverage at group rates for a maximum period of 18-36 months. Group health plans that are sponsored by employers with 20 or more employees on more than 50% of its typical business days in the previous calendar year are subject to Federal COBRA; group health plans that are sponsored by employers with fewer than 20 employees on more than 50% of its typical business days in the previous calendar year may be subject to state continuation laws, such as Pennsylvania’s mini-COBRA or New Jersey Continuation. In determining whether or not a plan is subject to COBRA, both full- and part-time employees are counted. Each part-time employee counts as a fraction of a full-time employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.
Although Federal COBRA and state mini-COBRA laws provide continuation coverage to former employees whose group health plan coverage would otherwise end, there are many substantive differences between the laws. In this article, we will highlight some of the differences between Federal COBRA and PA mini-COBRA. Group health plans subject to COBRA continuation may include medical, prescription, dental, vision, and, in some cases, Healthcare Flexible Spending Accounts (Healthcare FSAs). Under PA mini-COBRA, only fully-insured medical and prescription plans are subject to continuation. Under PA mini-COBRA, the maximum period of eligibility is 9 months from the start of continuation coverage versus 18 – 36 months available under COBRA. Additionally, the PA mini-COBRA law requires that the employee be covered under the group health plan for 3 consecutive months prior to the qualifying event. COBRA requires only that the employee or qualified dependent be covered by the plan the day before the qualifying event. While this is not an exhaustive discussion of the substantive differences between Federal COBRA and PA mini-COBRA, it does highlight a few material differences.
Offering the incorrect continuation coverage can place employers at odds with the plan’s underlying insurance policy and can be costly. Consider the following example. An employer has fewer than 20 employees on more than 50% of its typical business days in 2012. In April 2013, an employee participating in the group health plan resigns. The plan administrator, following the same procedures as used in 2012, issues a federal COBRA notice offering the former employee and qualified beneficiaries 18 months of coverage instead of the 9 months available under PA mini-COBRA. The former employee elects to continue medical, prescription and pays premiums totaling 102% of the cost of coverage for the following 12 months. During the 12th month, the former employee has back surgery. The insurance company may deny payment because, under the employer’s group health policy, the former employee’s eligibility to participate ended 9 months after continuation coverage began.
Consider the converse example, as well. An employer who has 20 or more employees on more than 50% of its typical business days in 2012 issues a PA-mini COBRA notice, instead of the federal COBRA notice. Assuming the notice does not meet the federal COBRA notice requirements, there could be hefty penalties of $110 per day for each day the COBRA notice is not issued.
Employers who outsource their COBRA administration to their broker or other Third Party Administrator should be sure to advise their service provider of the change of status and inquire about their ability to administer state mini-COBRA, if necessary.
For assistance understanding your continuation coverage obligations under Federal or state law, please contact the attorneys in our Employment & Labor section.