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Pennsylvania’s Mini-COBRA Law

The Pennsylvania Insurance Law has been amended to require employers who employ at least two but less then twenty employees to offer continuation health coverage for individuals who lose their group health coverage due to certain qualifying events, including termination of employment. This statute is known as “Mini-COBRA” and became effective on July 10, 2009. Prior to the enactment of this Pennsylvania law only employers employing twenty or more employees were required by federal law to provide COBRA continuation coverage to their employees. Mini-COBRA entitles employees of small employers based in Pennsylvania who lose their group health coverage on and after July 10, 2009 to up to nine months of continued health group health coverage (“Mini-COBRA coverage”). Mini-COBRA requires coverage which is the same as the coverage the employee was receiving just prior to the qualifying event.

Qualifying event

A qualifying event is an event that would result in the loss of health coverage for the covered employee or eligible dependents, including the following:

(i) termination of employment (either voluntarily or involuntarily if not due to gross misconduct);
(ii) death of the covered employee;
(iii) reduction in hours of employment which renders the employee ineligible to participate in the group health coverage;
(iv) divorce or legal separation;
(v) a dependent child becomes ineligible to participate in the group health coverage because he or she fails to meet the overage criteria.

The qualifying event may occur before the effective date, July 10, 2009, but if the employee or dependent does not lose group health coverage until on or after July 10, 2009, the eligiblity for Mini-COBRA coverage exists. 

Eligibility

Employees and their dependents who are covered under group health insurance coverage through small employers are eligible for Mini-COBRA if they lose their coverage due to the occurrence of a qualifying event and have been covered under a group insurance policy for a minimum of three consecutive months prior to the qualifying event. Employees are not eligible for the subsidy if they expect to earn in excess of $125,000 or $250,000 for a married couple filing jointly. Other conditions which cause an individual to be ineligible under Mini-COBRA are:

(i) eligibility for federal Medicare coverage;
(ii) failure to verify ineligibility for other employer-based group coverage as an eligible dependent;
(iii) eligibility for coverage for any other group health coverage (excluding Medical Assistance and CHIP).

Cost of Coverage

The premium rate under Mini-COBRA may be up to 105% of the employer group premium rate. The employee may qualify for the COBRA subsidy issued earlier this year and the insurance company may charge the employee only 35% of the Mini-COBRA premium and will subsidize the remaining 65% of the premium. Although small employers do not subsidize Mini-COBRA, they must be cognizant of these new requirements and provide the requisite notices to eligible employees and dependents, as well as to their group health carrier, within thirty days of the qualifying event. 

Subsidy Qualification

If an employee becomes eligible for Mini-COBRA due to an involuntary termination of employment, other than for gross misconduct, on or after July 10, 2009, that employee may be entitled to the COBRA subsidy provided by federal law. Once eligible for the subsidy, the employee is required to pay only 35% of the Mini-COBRA premium. Unlike federal COBRA requirements, under the Mini-COBRA law, the small employer is not required to pay any amount of the Mini-COBRA premium. Pennsylvania law provides that the company providing health coverage for the employer will be responsible for the subsidized amount.

This subsidy will remain in effect for the lesser of nine months of Mini-COBRA coverage or as long as the employee does not lose eligibility for the coverage. Eligibility for coverage stops if:

(i) the recipient becomes eligible for Medicare;
(ii) the recipient becomes eligible for other employer-based coverage;
(iii) the recipient fails to pay the premiums on a timely basis; or
(iv) the employer’s group coverage is terminated.

Notice requirements

Insurers are required to notify employers on or before August 24, 2009 of the details of the new requirements. Effective immediately, employers are required to notify the plan administrator, the insurance company, and the covered employee of any qualifying events for their covered individuals within thirty days of occurrence. The covered individuals have thirty days after receipt of notice to elect to receive Mini-COBRA coverage. Mini-COBRA coverage will apply retroactively to the date that the prior group coverage ended and there will be no break in coverage.