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Employers Covered By The Massachusetts Mini-COBRA Law Must Now Offer The Same Special Election Period And Corresponding Federal Subsidy As Those Covered By COBRA

July 2009 by Sara Goldsmith Schwartz

Massachusetts has enacted legislation incorporating into its Mini-COBRA law the same special election period and corresponding federal subsidy that were recently added to the federal COBRA law via the federal stimulus bill, the American Recovery and Reinvestment Act (“ARRA”).

Special Election Period

Massachusetts employers covered by Mini-COBRA (those with 2-19 employees) must, for certain employees and dependents who lost health-insurance coverage due to an involuntary termination for reasons other then gross misconduct between September 1, 2008 and February 16, 2009 (“assistance eligible individuals” or “AEIs”), now provide:

  • Another opportunity to elect health-insurance continuation coverage; and
  • An opportunity to receive, in accordance with ARRA, a federal subsidy of 65% of the applicable premium for up to nine months.

In particular, these requirements apply to AEIs who either (i) declined Mini-COBRA continuation coverage prior to ARRA’s passage on February 17, 2009, or (ii) elected Mini-COBRA continuation coverage but allowed such coverage to lapse.  Notice of this special election and the corresponding federal subsidy must be provided by September 2, 2009, and each recipient must be given 60 days to make this special election.

Although insurance carriers are generally obligated to provide this notice, Massachusetts law allows carriers to pass this responsibility to the employer.  Accordingly, employers should coordinate closely with their insurance carriers with respect to this obligation.  The United States Department of Labor has created model notices that may be used for this purpose.

Corresponding Federal Subsidy

When this special election is made, continuation coverage under the Massachusetts Mini-COBRA law will begin in the first period of coverage following the enactment of this statutory revision (for group health plans with calendar month periods, this will be August 1, 2009).  An AEI’s receipt of the federal subsidy, which, as noted, covers 65% of the employee’s health-insurance premium, will generally continue until the earliest of the following dates:

  1. Nine months after the first day the AEI becomes eligible for the federal subsidy;
  2. When the AEI’s maximum period of Mini-COBRA continuation coverage expires;
  3. When the AEI fails to pay the required 35% contribution of the continuation-coverage premium; or
  4. When the AEI becomes eligible for coverage under Medicare or another qualifying group health care plan.

Significantly, when this special election is made under the Massachusetts Mini-COBRA law, the insurance carrier—not the employer—must provide the 65% subsidy, which is to be reimbursed by the federal government via a payroll-tax credit.  Thus, while the carrier may shift notification responsibility to the employer, it cannot shift to the employer the responsibility to “front” the subsidy payment.  This is a major departure from the revised COBRA, under which employers are typically “fronting” the subsidy payments.

Legislative History

When the U.S. Congress enacted ARRA, it did not (and constitutionally could not) amend state Mini-COBRA laws to incorporate the special election period and the corresponding federal subsidy.  However, it made the federal subsidy available to states that chose to adopt these measures.  The amendments to the Massachusetts Mini-COBRA law reflect the Bay State’s decision to take advantage of this federal subsidy, which otherwise would not be available to employees of small businesses.

Recommendations For Employers

Employers covered by the Massachusetts Mini-COBRA law are encouraged to do the following to ensure compliance with the new amendments:

  • Review employment records to determine which individuals, if any, may be eligible for notice of the special election and the corresponding federal subsidy;
  • Update Mini-COBRA notices and eligibility forms to comply with Mini-COBRA’s new requirements, and distribute these notices and forms appropriately; and
  • Confer with their group health-insurance carrier to ensure that all AEIs are being offered continuation coverage in accordance with these new requirements.

Please contact us if you have questions or need assistance in achieving compliance with the revised Massachusetts Mini-COBRA law.