This Barley Snyder Alert summarizes two bills recently signed by Governor Ed Rendell that significantly impact Pennsylvania employers sponsoring health insurance plans for their employees.

On June 10, 2009, Governor Rendell signed into law health insurance continuation coverage requirements that will apply to Pennsylvania employers with 2-19 employees that sponsor an insured health plan for their workforce. Since 1985, there has been a similar federal law in place (commonly referred to as COBRA because it was enacted by the Consolidated Omnibus Budget Reconciliation Act of 1985) that is applicable to employers with 20 or more employees, requiring such larger Pennsylvania employers to offer terminated employees and their dependents the opportunity to retain their health insurance coverage for prescribed periods of time, at the former employee’s expense. Pennsylvania now joins the vast majority of its sister states that have enacted some form of “mini-COBRA” law, imposing on smaller employers not covered by the federal COBRA statute, an obligation to offer extended coverage to former employees and their families similar to the obligations of the federal COBRA statute. 

Pennsylvania’s new mini-COBRA law will go into effect July 10, 2009, 30 days after its enactment. It will apply to Pennsylvania employers that normally employ between 2-19 employees, and that sponsor an insured hospitalization, surgical or major medical plan for employees and their dependents. Any such employee or dependent whose coverage under the plan would terminate because of a “qualifying event” (generally, this would include an employment termination, other than due to gross misconduct, a reduction in work hours, a death, a divorce or a loss of dependent child status) shall be entitled to continue the employer-provided coverage for up to 9 months, subject to conditions including:

·         the employee or dependent had to have the employer coverage in effect for at least three months prior to the qualifying event;

·         the employee or dependent must pay, on a monthly basis, the cost imposed by the employer for the continuation coverage, which may not be more than 105% of the group rate charged by the insurer for the coverage being continued; and

·         the employee or dependent cannot be covered by, or eligible for coverage under, Medicare or any other group insured hospitalization, surgical or major medical plan.

 

Similar to the federal COBRA law, the Pennsylvania mini-COBRA law imposes on the employer an obligation to notify the employee and dependents of the continuation coverage rights, generally within 30 days of the qualifying event. They then have up to 30 days to elect the continuation coverage, retroactive to the date of the qualifying event.

The federal government recently enacted a COBRA-subsidy law under which an employee who is involuntarily terminated from employment prior to January 1, 2010, can receive a 65% federal subsidy toward the cost of up to nine months of federally-mandated or state-mandated COBRA continuation coverage. As a result of this new Pennsylvania mini-COBRA law, employees of smaller employers in Pennsylvania, who previously had no COBRA protection, will now be eligible for this 65% federal subsidy if they are involuntarily terminated in 2009 after the July 10 effective date of the new Pennsylvania law.

Also on June 10, 2009, Governor Rendell signed new legislation under which insured health plans in Pennsylvania must now offer, at the employer’s discretion, continuing coverage for adult children of insured employees up to age 30, subject to certain eligibility restrictions. If an employer sponsoring a plan does opt to offer this extended coverage, it will apply to the employee’s adult children who (1) are unmarried, (2) have no dependents of their own, (3) have no group, individual or governmental insurance coverage of their own, and (4) either reside in Pennsylvania or are enrolled as full-time students. 

Prior to this new law, coverage for dependent children was not required after age 19, with an exception for children who were full-time students. For full-time students, coverage typically was extended to age 23 or 25. Employers that elect to offer this extended coverage for adult children are authorized to pass through to the employees who elect it 100% of the cost of the expanded coverage. The new law applies to new health insurance contracts or existing contract renewals that occur after December 10, 2009;  so, for example, it will apply to contracts on a calendar year renewal basis beginning with the January 1, 2010 renewal.

If you have questions about the impact that either of these new Pennsylvania laws will have on your health plan, or about your new plan sponsor obligations in light of these new laws, please contact Mark A. Smith at 717-399-1526 (msmith@barley.com) or Harry Booker at 717-399-1561 (hbooker@barley.com).