On June 10, 2009, Governor Edward G. Rendell signed H.B. No. 1089, which caused Pennsylvania to adopt a “Mini-COBRA” law which covers group health insurance policies offered to employees of small employers.

COBRA is a federal law that gives workers who lose their jobs (and their employer-based health benefits) the right, under certain circumstances, to purchase continuation of group health coverage provided by the employer’s plan. Federal COBRA does not apply to plans sponsored by employers with fewer than 20 employees. Thus, prior to the enactment of the Mini-COBRA law, Pennsylvania employers with between two and nineteen employees were not required to offer continuation of health insurance coverage under their group health insurance plans to their employees.

With the passage of the Mini-COBRA law, an employee whose employment is terminated by a small employer is now eligible for state Mini-COBRA benefits. The new law will have two important effects. First, it will require small employers’ group health plans that are not subject to the federal COBRA law to offer continued group health insurance to employees and qualified dependents of employees who experience a qualifying event, (e.g., death of a covered employee, termination of a covered employee’s employment (other than for the employee’s gross misconduct), a spouse's divorce or legal separation from the covered employee, entitlement to certain benefits under the Social Security Act, and loss of status as a dependent child). 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 (9) months from the date of the qualifying event. Coverage will be offered at the employee’s or the qualified dependent’s expense (up to 102 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 (3) 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 Mini-COBRA law will enable covered individuals to take advantage of the premium subsidy provisions of the American Recovery and Reinvestment Act of 2009 (the “ARRA”), whereby, 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 (i.e., July 10, 2009), and before January 1, 2010.

The new law also includes notification requirements applicable to employers, employees and dependents, plan administrators, and insurers. Employers with between two and nineteen employees should consult with counsel and their benefits providers to establish policies to comply with the new Mini-COBRA law.