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Pennsylvania Adopts "mini-Cobra" Law for Small Employers

June 18, 2009 | Legal Alert
Marc Garber

Effective July 10, 2009, employers in Pennsylvania with fewer than 20 employees (but more than one) will be covered by a new "mini-COBRA" law requiring health care insurers - not employers -- to make continuation coverage available to certain terminated employees, and their covered dependents.

Governor Rendell signed the law this week, after the General Assembly passed it in response to the federal American Recovery and Reinvestment Act of 2009 (the "ARRA").  It covers employees of employers that are too small to be covered by the federal COBRA law, which applies only to employers with 20 or more employees.  Eligible employees who elect coverage under Pennsylvania's new mini-COBRA law can be covered for up to nine months following a qualifying event.

Pennsylvania's new "mini- COBRA" law differs from the federal law in several important respects:

Covered employers will welcome the fact that under Pennsylvania's new "mini COBRA" rules, the insurer is responsible for sending out required notices and forms to eligible employees and covered dependents.  Employers simply must notify the plan administrator within 30 days when a covered person experiences a qualifying event.  The covered person then has 30 days to make his or her election.  The plan administrator then has 14 days to notify the insurer of the beneficiary's election.

Federal subsidy applies.  Pennsylvania's "mini-COBRA" law includes a 65 percent employee subsidy that is similar to the ARRA provisions recently applied to the federal COBRA law, in cases in which a covered employee is involuntarily terminated for reasons other than gross misconduct.  In such a case, the cost of continuation coverage is subsidized for up to nine months (or shorter if the covered person becomes eligible for Medicare or another group health plan).  The 65 percent subsidy is advanced by the insurer (not the employer, as ARRA mandates for COBRA).   The subsidy will apply to individuals involuntarily terminated before January 1, 2010, provided an election to continue coverage is also made within this time frame. The new "mini- COBRA" continuation coverage rules will continue to apply after 2010, but without the 65 percent subsidy for employees who are involuntarily terminated, unless the ARRA subsidy is extended.

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