Are You Compliant with PENNSYLVANIA mini COBRA?
The Pennsylvania Mini COBRA laws have been on the books for a few years now. Yet many small employers in Northeastern and Central Pennsylvania are either not aware or simply ignoring the new requirements. Below is a short guide to the relatively new law that will help you avoid fines and stay in compliance.
Pennsylvania Mini COBRA, a brief history
The Pennsylvania Mini COBRA law went into effect July 10, 2009. At that time the Great Recession was causing many people to lose their jobs and consequently their health insurance. While terminated employees of large companies were able to keep their benefits through the Federal COBRA laws, workers at smaller firms did not have those same rights. Hence Pennsylvania created the Mini COBRA law. It gives employees of smaller companies the right to purchase continuation health insurance after their employment ends.
Who does this law affect?
Pennsylvania businesses with less than 20 employees on the majority of days in the prior calendar year. This formula is especially relevant for companies that hover around the 20 employee mark. If you have 20 or more employees, then you are subject to Federal COBRA laws rather than Pennsylvania Mini COBRA.
How does it work?
Companies must send a COBRA offer to Employees, and their dependents, who lose group health insurance coverage. The offer allows them to stay on the employer’s medical plan for up to nine additional months from the time their original coverage ended. However they must pay the full premium during this time.
When must you Offer Mini COBRA?
Anytime an employee or dependent loses coverage under the group health plan. This is typically called a “Qualifying Event”. A few examples of when employers must offer Mini COBRA to employees:
- An employee is fired
- An employee quits (yes even when they quit)
- A reduction in hours causes the employee to no longer be eligible for the benefits
Next some qualifying events where companies must offer Mini COBRA to dependents:
- An employee becomes divorced (Mini COBRA must be offered to the ex-spouse)
- A dependent child becomes too old to stay on the policy, generally when they turn 26
You may be thinking, do I always have to offer Mini COBRA? No, there are two, pretty specific situations where you don’t. First, if the employee was covered under the medical plan for less than three consecutive months. Second, if the employee is fired for gross misconduct.
How do you make the offer?
First, download the Model Mini COBRA Notice from the PA Insurance Department website. The notice can be modified to include the affected employee or dependents information. Next, you must send the notice. While the law doesn’t specify how to provide it, they’re typically sent in the mail. The letter must be postmarked within 30 days of the qualifying event and you should keep proof of the mailing.
How much should you charge?
Employers usually charge the actual cost of the coverage. So, for example, if the former employee’s monthly premium was $352.25. Then they would pay exactly that much for Mini COBRA. However you can add on an extra 5% for the administrative hassle.
What Coverages must You include in the offer?
You only have to offer medical coverage in the Mini COBRA offer. Therefore you do not have to include ancillary benefits like dental, life and vision insurance.
How does the employee/Dependent Accept the offer?
First they complete the election form included in the Mini COBRA offer. Then they must return it to the employer. Once received, the employee, or dependent, only has 30 days to return the election notice. If the employee doesn’t respond the offer is assumed to be declined.
How does the employee pay for the coverage?
Employees must pay their premium to the employer each month. The law does not indicate when the payments are due. However most employers require it by the date their own premium is due to the insurance company. It’s important to state clearly in the offer not only when premium payments are due but how to make them. Be specific by including a monthly due date and preferred method of payment. For example, “You are required to pay your premium by the 25th of each month for the following month’s premium. Please send a check, no cash, via first class mail to our company address”. Same thing goes for the initial premium payment. Let them know when and how you expect the first payment.
What if the employee stops paying? The employer can terminate the former employee’s coverage if they do not pay the premium by the end of the grace period. Generally the grace period is 30 days past the original due date. So for example, if the ex-employee’s payment is due on May 5th, they would technically have until June 5th to make the payment.
Is there a penalty for non compliance?
The PA Mini COBRA law does not include any specific penalties. However employers may potentially face fines from the Insurance Department if they do not comply.
While the PA Mini COBRA law may seem complex at first, hopefully you now realize is isn’t too hard to follow. Once you start to make this part of your routine it will become second nature. But that’s the important part, making it a habit. Every time an employee or dependent is removed from your health plan be sure to think “Mini COBRA”. If you get stuck just come back to this page for a quick refresher. But if you still have questions, contact us and we’ll be glad to help!