COBRA Control Services, LLC

On June 3, 2009, the Pennsylvania Senate unanimously passed a “mini-COBRA” bill for employees of small employers in Pennsylvania. The bill will provide for continued health insurance in a manner comparable to the federal COBRA law. The bill has been sent to Governor Rendell for his signature.

The new law has two important provisions. First, it will require small employers’ group health plans that are not subject to the federal COBRA law (typically, those of employers with between two and 19 employees) to offer continued group health insurance to employees and qualified dependents of employees who experience a qualifying event, including death of a covered employee, termination of a covered employee’s employment (other than for the employee’s gross misconduct), and a spouse’s divorce or legal separation from the covered employee.

Such continuation coverage must be offered at the same level of benefits that the employee received prior to the qualifying event, and for a period of up to nine months from the date of the qualifying event. Coverage will be offered at the employee’s or the qualified dependent’s expense (up to 105 percent of the normal cost of coverage).

The law will exclude from continuation coverage any individual who (i) was not covered by the employer’s group health plan for at least three months prior to the qualifying event; (ii) is eligible for coverage under Medicare; or (iii) is, or could be, covered by another group health insurance arrangement. Second, the Pennsylvania mini-COBRA law will enable covered individuals to take advantage of the premium subsidy provisions of the American Recovery and Reinvestment Act of 2009 (ARRA).

Under ARRA, any employee of a small employer who becomes entitled to continuation coverage under the Pennsylvania mini-COBRA law by virtue of his or her involuntary termination from employment will be entitled to a federal government subsidy of 65 percent of the premiums for the coverage, so long as the employee pays the remaining 35 percent. An employee will be eligible for the subsidy only if his or her employment termination occurs after the effective date of the new law, which will be the 30th day after signature by the governor, and before January 1, 2010.

The new law includes notification requirements applicable to employers, employees and dependents, plan administrators, and insurers. The group policy must provide notice of the new law to policyholders within 45 days of the effective date of the law.

Employers of covered employees, within 30 days of a qualifying event, must notify the employee or dependent, the insurer, and the plan administrator (unless, obviously, the plan administrator is the employer) of the qualifying event and must inform the employee or dependent of his or her rights under the law. The covered employee or eligible dependent must notify the plan administrator of his or her election of coverage within 30 days of receiving the notice of rights from the employer.

STACK: IMPROVED MINI-COBRA LEGISLATION PASSES SENATE Stack HARRISBURG, April 1 – The Pennsylvania Senate today unanimously approved legislation that includes state Sen. Mike Stack’s amendment to give employees of small businesses who were laid off access to federal COBRA subsidies.

Stack authored an amendment, approved by the full Senate on Tuesday, clarifying that recipients of mini-COBRA health insurance may also have access to premium assistance provided through the American Recovery and Reinvestment Act of 2009 to purchase COBRA health insurance benefits.

“Hopefully, this window of coverage will provide working people with enough time to get back on their feet, find a new job and hopefully obtain affordable health insurance benefits,” Stack said. “Regardless of the circumstances, everyone should have access to affordable health care, and this legislation will help those who lose their job and health coverage.”

The senator worked closely on the amendment with state Sen. Don White (R-Armstrong, Butler, Clearfield, Indiana, Westmoreland), the author of the legislation (Senate Bill 442) and the Republican chairman of the Senate Banking and Insurance Committee. Stack is the Democratic chairman.

In order to access the federal subsidy, the state mini-COBRA program needed to be substantially similar to the federal COBRA plan. Senate Bill 442 would ensure the mini-COBRA program mirrors the federal program to help former employees access the federal subsidy.

The Obama administration’s economic stimulus plan has allocated funding to help the unemployed manage their health care costs by enabling displaced workers the opportunity to purchase health care benefits at a discounted rate through COBRA.

The federal subsidy would last up to nine months, but could end earlier if the employee fails to pay premiums or finds other health insurance coverage.

In order to utilize COBRA, employees must have been insured under their company’s group policy for three months prior to the termination of coverage. Continuation of coverage would not apply to someone who is eligible for coverage under Medicare; someone who fails to verify ineligibility for other employer-based group health insurance; someone who is covered by a spouse or dependents health insurance.

The bill also provides eligibility for employees terminated after the bill’s effective date and before January 1, 2010 to receive federal stimulus COBRA premium assistance.

The Aetna announced yesterday it would no longer provide COBRA administration services as described below…

COBRA Control Services is available with plenty of capacity to support employers who need to replace Aetna’s COBRA administration services, and COBRA Control Services can have an employer group up and running in a day or so with complete administration services. Simply call COBRA Control Services at: 1-888-887-6187 or emal us a info@cobracontrol.com for more information.

COBRA Control Services Pricing (No Monthly Fees):

• Account Setup and Annual Renewal: $95*
• On-Demand Qualifying Event Notices: $25*
• ARRA Notices: $25*

* Fee Discounts Available for Large Groups and Agent/Broker’s “Books of Business.“

SUMMARY OF AETNA NOTICE ANNOUNCING IT IS DISCONTINUING COBRA HOME BILLING SERVICES

Discontinuing Aetna HMO COBRA Home Billing Services
As a result of the COBRA-related changes, Aetna notified us that it will no longer be able to offer its HMO COBRA Home Billing service, effective May 1, 2009. This service provided COBRA eligibility maintenance and billing to its HMO customers upon request at no additional charge.

Employer Notification
In that email, Aetna stated tht those employers who elected Aetna’s COBRA Home
Billing Service will be notified this week of the discontinuation. Aetna also wrote that its notice will provide the option for Aetna, or the employer to administer those services. Apparently, the mailings will include a list of the names and addresses of customers and members currently being home billed if applicable.

Aetna indicated that specific letters will be distributed depending on the size of the employer group:

• 300+ group size
• 51–299 group size with Aetna COBRA brochure
• 20–50 group size with Aetna COBRA brochure
• 1–19 group size in the states where Aetna is required to administer state continuation* for the employer – States include AR, CA, FL, KS, KY, MD, MS, NE, NH, NV, OK, RI, and VT.
• 1 – 19 group size in the states where the employer is required to administer state continuation* – States include CO, CT, GA, HI, IA, IL, IN, LA, MA, ME, MN, MO, NJ, NY, NM, NC, ND, OH, OR, SC, SD,TN,TX, UT, VA, WA, WV, WI, WY and DC.
• 1-19 group sizes in the states that have no continuation* –States include AK, AL, AZ, DE, ID, MI, MT, and PA.

*State designations are subject to change.

Federal and State Continuation Requirements

Employers with 20 or more employees
Federal COBRA rules apply to group sizes over 20 employees who maintain group health plans. Employers are responsible for administering COBRA, although they may designate another organization (such as Aetna) to administer the program for them. As a result of the ARRA, employers are responsible for funding the subsidy, and are reimbursed through a payroll tax credit.

Employers with less than 20 employees
Many states require continuation of group coverage for terminated employees for group sizes under 20 lives. The ARRA mandates the subsidy for these members as well, but requires carriers, such as Aetna, to fund the subsidy, and then be reimbursed through the carrier’s payroll tax credit. In addition, 13 states require that the carrier handle the administration of state continuation, while 30 states require the employer to administer state continuation. (The remaining balance of 8 states are not affected by this
legislation).

Aetna announced it is making the necessary process changes to enroll assistance eligible individuals in state continuation, accept their 35 percent premium payments and administer the premium subsidy, where applicable.

State Continuation Employer Mailings
Aenta indicatEd that its mailings to employer groups with less than 20 employees to assure compliance with the ARRA are underway and will be distributed this week. Apparently, one set of mailings is aimed at employers in 13 states where Aetna must administer the state continuation. Meanwhile, another set is aimed at employers in 30 states where the employer must administer the state continuation. In both cases, Aetna noted it will need to record terminated employee names and addresses and is responsible for applying for the payroll tax credit for the ARRA subsidy.

States where the employer administers state continuation
In the following states, Aetna wrote that the employer is responsible for administering state continuation*: CO, CT, GA, HI, IA, IL, IN, LA, MA, ME, MN, MO, NJ, NY, NM, NC, ND, OH, OR, SC, SD,TN,TX, UT, VA, WA, WV, WI, WY and DC. Aetna stated that employers in these states will receive the following materials:

• Employer letter explaining the subsidy
• Instructions sheet requesting information
• Employer Attestation – ARRA Employee Subsidy – Form
• ARRA State Continuation Coverage Supplemental Notice for the employer to distribute to individuals on state continuation

States where Aetna administers state continuation
Aetna stated it administers state continuation in the following states, *: AR, CA, FL, KS, KY, MD, MS, NE, NH, NV, OK, RI, and VT. Aetna further stated that employers in these states will receive the following materials:

• Employer letter explaining the subsidy
• Instructions sheet requesting information
• Employee on State Continuation Form
• Employer Attestation – ARRA Employee Subsidy – Form
• ARRA State Continuation Coverage Supplemental Notice for the employer to distribute to individuals on state continuation

*State designations are subject to change.

COBRA Control Services is available with plenty of capacity to support employers who need to replace Aetna’s COBRA administration services, and can have an employer group up and running in a day or so. Simply call COBRA Control Services at: 1-888-887-6187 or emal us a info@cobracontrol.com.

The information contained herein is for informational purposes only and is not intended as legal or tax advice, nor is it intended to advise you of your obligations under ERISA, COBRA, HIPAA or the American Recovery and Reinvestment Act of 2009. It should not be used or relied upon as the basis for any action or choosing inaction. Consult an experienced benefits attorney or tax professional about your specific situation before deciding on any course of action or inaction.

This material is for informational purposes only and contains just a partial, general description of program benefits. Plans and programs may not be available in all service areas.

Aetna is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies. Those companies include: Aetna Health Inc., Aetna Health of California Inc., Aetna Dental of California, Inc, Aetna Health of the Carolinas Inc., Aetna Health of Illinois Inc., Aetna Health Insurance Company of New York, Aetna
Health Insurance Company and/or Aetna Life Insurance Company (Aetna). In MD, by
Aetna Health Inc., 151 Farmington Avenue, Hartford, CT 06156.

Material in email does not constitute a contract or legal advice and is subject to change. COBRA Control Services, LLC is not affiliated with Aetna or Aetna-related company.

Q. Would a group of less than 20 FTE employees in 2008 in Pennsylvania (a state without a mini-cobra requirement) who offers separated employees a continuation coverage, and uses a qualifying event letter that states “COBRA” throughout, be subject to ARRA?  
A. No.  Just saying you are subject to COBRA does not make you subject to COBRA. Employers with fewer than 20 employees are excepted from COBRA. An employer can always subsidize the cost of continuation coverage.  If the employer is not subject to ARRA, the employer would not be able to recoup the subsidy from the government.

Q. I read in another firm’s newsletter that a qualified beneficiary would be eligible for the subsidy if the employee had “or reduction in hours.” What do you think? 
A. A reduction of hours would not entitle a qualified beneficiary to assistance.  The qualifying event with respect to COBRA continuation coverage must be the “involuntary termination” of the covered employee’s employment. 

Q. If an employer provides COBRA to a separated employee who separated due to gross misconduct and now regrets providing such cobra coverage, can they go back and reclassify the employee and take away their coverage, or, minimally exclude them from ARRA?
A In general, courts do not look favorably upon denying COBRA coverage due to gross misconduct.  Courts have set a very high standard for gross misconduct.  There is a good chance that going back and “undoing” COBRA coverage based on gross misconduct would not withstand scrutiny.

We are hearing rumblings that the Department of Labor (DoL) MIGHT take the position that former employees who are Assitance Eligible Individuals have to affirmatively elect to receive the premium subsidy under ARRA; that is, the premium subsidy may not have to be provided by the employer automatically.
 
The current reading of the statute does not seem to support this position.  For example, why would high income individuals have to affirmatively opt-out of the subsidy if the requirement is for everyone to opt-in?  Despite this, the DoL is indicating that it is possible that its model notices will include an election procedure.

BAS/CCS will keep you posted on this new development. And, of course, BAS/CCS will modify its notices, accordingly.

Today, at 4:55 PM, BAS/CCS emailed the following notice to all of their COBRA Administration clients and those clients’ insurance agents/brokers of record:

We are pleased to inform you that we have implemented a new version of our COBRA Qualifying Event Notice (QEN) that provides the American Recovery and Reinvestment Act of 2009 (ARRA) required notices and premium subsidies (if any).

All new QEN processing you perform will use this new QEN beginning today and lasting until the end of the ARRA requirements. Moreover, any person receiving this new QEN will not need any other special notice, or receive any special enrollment period beyond the normal COBRA offerings stated in the QEN.

As usual, each time we produce a QEN for you, our system will send you a PDF copy of such QEN.

We expect to release all of the other notices required by ARRA next week. We will update you as we release these notices.

If you have any questions about this information, please contact us.

Sincerely,
Benefit Allocation Systems, Inc. – (800) 945-5513
Cobra Control Services, LLC – (888) 887-6187
MyEnroll.com

The information contained herein is for informational purposes only and is not intended as legal or tax advice, nor is it intended to advise you of your obligations under ERISA, COBRA, HIPAA or the American Recovery and Reinvestment Act of 2009. It should not be used or relied upon as the basis for any action or choosing inaction. Consult an experienced benefits attorney or tax professional about your specific situation before deciding on any course of action or inaction.