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Is Mini-COBRA Lurking in Your State?

Is Mini-COBRA Lurking in Your State?

It’s no secret there’s a lot to keep track of as a small business owner. If you have under 20 employees, you may not think offering COBRA continuation coverage insurance to your employees is one of them.

However, many states currently require all small employers to offer continuation insurance to their participants.

We will review the six states that PrimePay currently administers COBRA continuation to.

Starting with the Basics: What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows group health plan participants to continue coverage if they experience certain qualifying events (QEs), resulting in a loss of coverage under the plan. These individuals are referred to as qualified beneficiaries (QBs).

COBRA applies to a wide range of group health plans, including major medical, dental, vision, health flexible spending accounts (health FSAs), and health reimbursement arrangements (HRAs). It may also apply to employee assistance programs (EAPs), telemedicine, and wellness plans if they provide substantive medical care.

COBRA applies to employers with 20 or more employees on a typical business day during the previous calendar year. Church plans and governmental entities are exempt. QEs that may require an offer of COBRA include termination of employment, reduction of hours, death of the covered employee, divorce or legal separation from the covered employee, employee enrollment in Medicare, and a dependent losing eligibility under the plan. These events may result in a maximum coverage period of 18 or 36 months and extensions due to disability or for a second QE may apply.

If a QB elects COBRA, the plan may charge the entire premium plus an administrative fee (ex., 102% of the applicable premium). Generally, the applicable premium for insured plans will be the full cost of the insurance premium paid to the insurance carrier.


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What is state continuation (aka mini-COBRA)?

Just because an employer is not subject to COBRA doesn’t mean that they’re off the hook completely. Many states now require small employers to offer continuation coverage for their insured group health plans and PrimePay administers so called ‘state continuation’ for several states.

The information below details several requirements under state continuation laws currently administered by PrimePay, however, the information is intended to provide general information only and is not an exhaustive list of state continuation requirements. If you have any additional questions, you should contact PrimePay or an employment attorney.

 

Arizona

Who is subject?

Arizona state continuation laws apply to all Arizona small employers (at least one, and not more than 20, eligible employees during the previous calendar year).

Who is eligible for continuation coverage?

Employees who are covered under the employer’s group health plan for at least three months before the QE as well as their covered spouses and dependent children.

What benefits are subject to continuation?

Arizona’s state continuation applies to fully insured group health plans. The regulations define a health benefits plan to include a hospital and medical service corporation policy or certificate, a health care services organization contract, a group disability policy, a certificate of insurance of a group disability policy that is not issued in this state or any other arrangement under which health services or health benefits are provided to two or more individuals.

At this time, specific guidance has not yet been issued regarding which group health plans apply but may include fully insured medical, dental and vision plans. Self-insured plans (including health FSAs and HRAs) are not subject.

What is the maximum coverage period?

Arizona’s state continuation guarantees 18 months of continuation coverage for all QEs. This timeframe may be extended if the QB experiences a second QE or receives a disability determination.

What is the maximum premium that can be charged?

105% of the applicable premium.

 

Connecticut

Who is subject?

All Connecticut employers are subject, including church plans and governmental entities. The law applies to small employers (guaranteeing continuation coverage) and employers subject to federal COBRA (extending the maximum coverage period for certain QEs).

Who is eligible for continuation coverage?

Employees who are covered under the employer’s group health plan immediately before the QE as well as their covered spouses and dependent children.

What benefits are subject to continuation?

Only fully insured group medical and hospitalization plans, including indemnity plans, are subject. It does not apply to standalone dental, vision, or prescription policies. The law also does not apply to self-insured plans, such as health FSAs or HRAs.

What is the maximum coverage period?

The law guarantees 30 months of coverage in the event of termination of employment, reduction of hours, or leave of absence. For employers subject to federal COBRA, Connecticut continuation would begin after the 18 months on federal COBRA are exhausted, up to a maximum coverage period of 30 months.

Thirty-six months of continuation coverage applies if the loss of coverage results from the death of the covered employee, divorce or legal separation from the covered employee, if the employee enrolls in Medicare, or a dependent loses eligibility. The maximum time frame may be extended from 30 to 36 months if a QB experiences a second QE.

What is the maximum premium that can be charged?

102% of the applicable premium.

 

New Jersey

Who is subject? 

New Jersey state continuation applies to small employers (two to 50 eligible employees) who are not subject to federal COBRA. This would apply to employers not subject to federal COBRA because of their size (under 20 employees) or plans exempt from federal COBRA, such as church plans and governmental entities.

Who is eligible for continuation coverage?

Employees who are covered under the employer’s group health plan immediately before the QE, as well as their covered spouses and dependent children.

What benefits are subject to continuation?

Only fully insured group medical and hospitalization plans are subject. Standalone dental or vision plans would not be guaranteed continuation coverage. The law also does not apply to self-insured plans, such as health FSAs or HRAs.

What is the maximum coverage period?

The law mirrors federal COBRA. If the loss of coverage is due to termination of employment, reduction of hours, or a leave of absence, 18 months of continuation coverage applies.

Thirty-six months of continuation coverage applies if the loss of coverage results from the death of the covered employee, divorce or legal separation from the covered employee, or if a dependent loses eligibility. A disability extension may apply if the QB is originally entitled to 18 months of coverage.

What is the maximum premium that can be charged?

102% of the applicable premium.

 

New York

Who is subject?

New York state continuation applies to all employers with insurance policies in the state, including governmental entities. Even employers who are subject to federal COBRA are subject and may need to provide extended coverage under the state rules, beyond what is required by COBRA.

Who is eligible for continuation coverage?

Employees who are covered under the employer’s group health plan immediately before the QE as well as their covered spouses and dependent children.

What benefits are subject to continuation?

New York continuation applies only to fully insured group medical, surgical, and hospitalization plans. It does not apply to standalone dental, vision, or prescription plans. The law also does not apply to self-insured plans, such as health FSAs or HRAs.

What is the maximum coverage period?

New York’s state continuation provides for 36 months of coverage in the event of any QE listed under federal COBRA.

For employers not subject to federal COBRA, the law provides for 36 months of state continuation coverage for any QB. For employers subject to federal COBRA, the law would extend coverage from 18 months (or 29 months in the event of a disability extension) to 36 months after federal COBRA is exhausted.

New York continuation would not apply for QBs guaranteed 36 months of coverage under federal COBRA.

What is the maximum premium that can be charged?

102% of the applicable premium.

 

Pennsylvania

Who is subject?

Pennsylvania state continuation applies to all small employers (two to 19 employees), including church plans and governmental entities.

Who is eligible for continuation coverage?

Employees who are covered under the employer’s group health plan for at least three months before the QE as well as their covered spouses and dependent children.

What benefits are subject to continuation?

Fully insured hospital, surgical and major medical benefits. It does not apply to standalone dental or vision plans.  The law also does not apply to self-insured plans, such as health FSAs or HRAs.

What is the maximum coverage period?

The law provides a maximum coverage period of nine months for all QEs listed under federal COBRA.

What is the maximum premium that can be charged?

105% of the applicable premium.

 

Texas

Who is subject?

Texas state continuation applies to all employers with insurance policies in the state. The law even applies to employers who are subject to federal COBRA and may require them to provide extended coverage under the state rules, beyond what is required by COBRA.

Who is eligible for continuation coverage?

Employees who are covered under the employer’s group health plan for at least three months before the QE as well as their covered spouses and dependent children.

What benefits are subject to continuation?

Texas state continuation laws only apply to fully insured hospitalization, surgical, and major medical group health plans. It does not apply to standalone  dental, vision, and prescription plans. The law also does not apply to self-insured plans, such as health FSAs or HRAs.

What is the maximum coverage period?

The maximum coverage period under Texas state continuation depends on whether the employer is subject to federal COBRA. For small employers not subject to COBRA (or exempt employers, such as church plans and governmental entities), the law provides nine months of continuation coverage for all QEs.

For employers subject to federal COBRA, the law provides for an additional six months of state continuation after the federal COBRA coverage period is exhausted (up to a maximum of 42 months of coverage).

What is the maximum premium that can be charged?

102% of the applicable premium.

 

Have questions about COBRA or state continuation?

PrimePay provides COBRA administration in just three simple steps. That means you can avoid costly penalties and excise taxes from COBRA audits. Click here to learn more or fill out our form below:

Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.  Consult your own legal advisor regarding specific application of the information to your own plan.