We routinely tell clients with fewer than twenty employees that they do not have to provide COBRA coverage to terminated employees. Effective July 10, 2009, this will no longer be true for those small employers who provide healthcare coverage for their employees. On that date, Pennsylvania's "Mini-COBRA" Law will require those employers to provide COBRA coverage to employees and their participating dependents who experience a "qualifying event," such as termination or a reduction in hours. The coverage will continue for nine months after termination, but the terminated employee can continue the coverage under certain circumstances. Mini-COBRA will require small employers to provide notice to employees that the coverage exists, and notice upon termination of the availability of the coverage. Employers could charge the terminated employee 105% of the premium for Mini-COBRA coverage, subject to the subsidy created by the American Recovery and Reinvestment Act ("ARRA").
The ARRA subsidy requires employers to help terminated employees defray the cost of healthcare. If an employee loses coverage under a health plan between September 1, 2008 and December 31, 2009 as a result of the employee's involuntary termination of employment, and elects Mini-COBRA continuation coverage, the employee will pay not more than 35% of the full premium for up to nine months. The employer must provide the remaining 65% of the premium for a period of nine months, or until the employee obtains other coverage. The employer is entitled to a tax credit as a result of these payments.
By July 10, 2009, small employers in Pennsylvania should work with their health insurance providers to assure that Mini-COBRA coverage will be available to eligible employees. Antheil Maslow & MacMinn, LLP can provide guidance for employers to ensure compliance, and to prepare the notices required by the law.