COBRA and Mini-COBRA: How States Are Responding to Opportunities to Help Laid-Off Workers

Many states have been grappling with the operational aspects of the COBRA premium subsidies made available through the federal American Recovery and Reinvestment Act of 2009 (ARRA) which are also available for coverage offered by smaller employers subject to state “mini-COBRA” laws. Some states are considering how to provide temporary coverage to those workers that are ineligible for COBRA or mini-COBRA programs. In the wake of AARA's premium subsidy, the State Coverage Initiatives (SCI) program has been exploring opportunities for states to build on the new federal legislation, as highlighted in a recent SCI brief.

There are many policy issues that deserve serious consideration by state policymakers seeking to provide health coverage to low- and moderate-income, laid-off workers and their families.  SCI has been providing technical assistance to a number of states on issues related to COBRA and mini-COBRA premium subsidies and has found that states are focused on several types of action:

First, states have created an extended election period for eligible individuals to enroll in state-mandated continuation policies.  States taking such action include Maryland, New Hampshire, New York, Ohio, Utah, and West Virginia, among others. (Note: in this article, the lists of states taking action are illustrative, not all-encompassing.)

ARRA itself provides an extended election period only for those eligible for COBRA, not also for mini-COBRA coverage. Further, the extended election period has to be mandatory under state law to trigger ARRA premium subsidies for the resulting mini-COBRA coverage. Depending on prior state law, states may decide they need a statutory enactment to do this, or they may be able to act through regulation alone. An SCI legal policy review concluded that states could likely modify insurers' obligations without offending the Contract Clause of the U.S. Constitution.

Second, states have adapted the notice that is federally required to be sent by insurers providing coverage under state Mini-COBRA laws to ARRA eligibles. Modifications to these notices reflect state-specific protections such as renewed election periods for mini-COBRA plans in a state. States taking such action include at least Maryland, New Hampshire, and West Virginia.

Third, states have provided a supplemental subsidy that adds to ARRA’s 65 percent premium payment for COBRA and state continuation. Through regulation, Massachusetts extended its pre-existing subsidy program to reduce workers’ share of premiums from 35 percent to 8 percent, and Minnesota is considering a bill that would supplement ARRA’s 65 percent subsidy.

An SCI policy review for one state concluded that states seeking to further subsidize coverage might well consider using a tax-withholding offset, following the ARRA approach, and, depending on the generosity of state health coverage programs, may be able to realize offsetting savings by shifting beneficiaries from state programs into ARRA-subsidized coverage

Fourth, states have subsidized coverage for laid-off workers ineligible for both COBRA and mini-COBRA. Pre-existing state law does this in Massachusetts, and Minnesota is considering legislation along those lines during its current session.

Please contact us at sci@academyhealth.org if you have questions regarding issues related to COBRA and mini-COBRA premium subsidies

Recommended resources for states:

1. ARRA, Public Law 111-5, Feb. 17, 2009, Title III, Premium Reduction; copy of relevant sections of statute posted by US DOL at http://www.dol.gov/ebsa/pdf/COBRAPremiumReductionProvision.pdf.
2. SCI mini-brief "How states can build on new federal legislation that subsidizes COBRA coverage for laid-off workers" http://www.statecoverage.org/node/1510.
3. ARRA Legislative History, February 12, 2009 (conference committee report, relevant section posted by US DOL) http://www.dol.gov/ebsa/pdf/JointStatementCOBRAPremiumReduction.pdf
4. IRS implementing rules/interpretation on Premium Assistance for COBRA Benefits, Notice 2009-27, undated but issued on 31 Mar 09 http://www.irs.gov/pub/irs-drop/n-09-27.pdf
5. USDOL, Publication of Model Notices for Health Care Continuation Coverage Federal Register 74(53):11971-11973, March 20, 2009 http://www.dol.gov/federalregister/PdfDisplay.aspx?DocId=22255(initial release at http://www.dol.gov/ebsa/pdf/2009-06131_PI.pdf )
6. USDOL webpage on COBRA & ARRA (continuously updated) http://www.dol.gov/ebsa/cobra.html
7. IRS webpage with Information Related to the American Recovery and Reinvestment Act of 2009 (continuously updated) http://www.irs.gov/newsroom/article/0,,id=204335,00.html?portlet=6
8. House Committee on Ways & Means, “How To” Manual ...Frequently Asked Questions on the COBRA Premium Reduction," February 27, 2009 http://waysandmeans.house.gov/media/pdf/111/cobra.pdf.
9. Congressional Research Service's detailed listing of and links to sources on ARRA, February 26, 2009 http://opencrs.com/document/R40244
10. The Robert Wood Johnson Foundation ‘quick strike’ brief prepared by the Urban Institute, "How Effectively Does the American Recovery and Reinvestment Act Help Laid-Off Workers and States Cope with Health Care Costs?” http://www.rwjf.org/coverage/product.jsp?id=40188
11. FamiliesUSA, “States Act to Help People Laid Off from Small Firms: More Needs to Be Done”   http://www.familiesusa.org/assets/pdfs/state-mini-cobra-laws.pdf