By Thomas I. Kramer
Readers of our February 16 and April 6 eAlerts know that the federal stimulus bill, titled the American Recovery and Reinvestment Act of 2009 (and now known as ARRA), provides a subsidy for continuation coverage in certain cases and opened a window that would permit certain qualified beneficiaries who are not on COBRA coverage to elect such coverage. In our April 6 eAlert, we cautioned that the Oregon legislature and Insurance Division might soon require Oregon-insured health plans to extend the state continuation coverage period and open a similar window for certain qualified beneficiaries not currently on state continuation coverage.
On April 28, 2009, Governor Kulongoski signed House Bill 2433, extending the maximum duration of state continuation coverage and authorizing the Insurance Division to require insurers to provide an additional continuation coverage election window (similar to the one required by ARRA) for plans governed by state law. On April 29, 2009, the Insurance Division issued temporary regulations implementing the new mandate. This eAlert will discuss who is affected by the new law and regulations and what the new law and regulations require.
State Continuation Coverage and ARRA Review
Continuation coverage has been mandated in Oregon since 1981, when Oregon first required Oregon-insured health plans to offer up to six months of continuation coverage. After Congress enacted COBRA in 1986, the Oregon mandate was restricted to health plans not subject to COBRA (generally, church plans and plans of employers who normally employed fewer than 20 employees in the previous calendar year). Thus, if COBRA doesn’t apply to your group health plan (because of the small-employer or church-plan exception), and the plan is insured by a contract issued or delivered in Oregon, state continuation coverage rules apply.
As explained in our previous eAlerts, ARRA permits certain qualified beneficiaries to get continuation coverage by paying 35% of the applicable premium for the coverage.
- The subsidy is available only to qualified beneficiaries who lost or lose coverage due to involuntary termination of employment between 9/1/08 and 12/31/09.
- The subsidy is available for periods of coverage starting after 2/17/09 (March 2009 and later months, in most cases).
- The subsidy is available for up to nine months, but ends when the qualified beneficiary becomes eligible for coverage by Medicare or another group health plan (other than a plan providing only dental or vision coverage or a health FSA or most HRAs) or fails timely to pay his or her reduced share of the applicable premium.
Additionally, ARRA required group health plans to offer a special election window to qualified beneficiaries who lost coverage due to involuntary termination between 9/1/08 and 2/17/09 but who either did not timely elect continuation coverage or who dropped such coverage.
Changes Made by New Oregon Legislation and Regulations
As noted above, Oregon law up to now has required only up to six months of continuation coverage. The new law and regulations extend that period in two respects to permit Oregonians to take full advantage of the ARRA premium subsidy. The new rules are effective immediately and apparently apply even to insurance policies currently in force.
- For coverage lost after February 28, 2009 due to one of the qualifying events recognized by state law, the maximum Oregon continuation period will now be nine months.
- For coverage lost before March 1, 2009 due to involuntary termination, Oregon continuation coverage may last until November 30, 2009. (So a qualified beneficiary who lost coverage on September 30, 2008 due to involuntary termination earlier that month, could be entitled to keep continuation coverage for 14 months.)
It appears that the state will use the IRS’s interpretation of “involuntary termination,” which is discussed in our April 6 eAlert. In the event of a dispute over whether a person was the subject of an involuntary termination, it appears that the federal Center for Medicare and Medicaid Services will provide an appeal procedure.
As also noted above, the Insurance Division requires Oregon health insurers to notify qualified beneficiaries who lost coverage due to involuntary termination between September 1, 2008 and February 17, 2009 but who either did not timely elect continuation coverage or who dropped such coverage that they have a new chance to elect continuation coverage and give those qualified beneficiaries at least 31 days within which to elect such coverage. If elected and paid for (subject to the federal subsidy, if applicable), such coverage will take effect retroactively to March 1, 2009, like the coverage provided pursuant to the ARRA special election window. Unlike COBRA coverage, complicated rules may govern whether family members may make different elections from the former employee.
The rules remain complicated with respect to employees’ registered same-sex domestic partners covered by the plan. Such a partner is eligible for both the extension of state continuation coverage and the new special-election window, but is not
eligible for the premium subsidy.
Please review the “Employer Action Steps” at the end of our February 16, 2009 e
Alert in light of the additional guidance described above. As ever, please feel free to contact us if you have questions or comments about these new rules, or any other employee benefits issues.