MN and COBRA Continuation Coverage - ¬Date 0_ 2007 by lonyoo


									                           HUMAN RESOURCES & BENEFITS INFORMATION
                             MINNESOTA AND COBRA
                            CONTINUATION COVERAGE

Note: This is a brief summary of the Minnesota Continuation Law and the Consolidated Omnibus
Budget Reconciliation Act (COBRA). It is intended to outline the most important points, but not to be
inclusive of all provisions.

The State of Minnesota has special provisions for continuing health coverage for police officers and
firefighters injured in the line of duty and for their covered dependents. For more information relating
to those provisions, please refer to MN Statute 299A.465. Special provisions also apply when an
employee is retiring prior to age 65, but has met age and service requirements necessary to receive a
pension such as PERA. For further information on these requirements, please refer to the LMC memo
titled Early Retirees: Continuation of Coverage.

Most employers are required under federal and state law to offer employees continuation of
medical benefits for a period of time after they leave employment. COBRA generally covers
group health plans maintained by employers with 20 or more employees. If an employer has less
than 20 employees, they are required to offer continuation of coverage under Minnesota law.

Generally, self-funded plans are subject to COBRA, but not state continuation laws. Fully-insured
plans are required to comply with both COBRA and Minnesota Continuation Law. Regardless of
plan structure, most cities are required to comply with state law as well as COBRA requirements
because they are either:

1. Covered under a fully insured group plan; or
2. Self-insured under MN Statute 471.617, which requires compliance with Minnesota insurance
   laws; or
3. Covered under the League of Minnesota Cities Insurance Trust (LMCIT), which is self-insured
   under MN Statute 471.617 and required to comply with Minnesota laws.

In many cases, Minnesota law provides more coverage to the individual than does COBRA. In
these instances, cities must follow Minnesota Continuation Law requirements. In some areas,
however, Minnesota Continuation laws are silent where COBRA provides regulation. In
situations such as these, cities must abide by COBRA requirements. These differences are
highlighted, where appropriate, throughout this memo.
Plans Covered by Minnesota Continuation Law and COBRA
Minnesota Continuation Law applies to group health plans, health maintenance organizations
(HMOs), dental plans, and group life insurance benefits. COBRA, unlike Minnesota law, does not
require continuation of group life insurance benefits.

Health benefits, in general, are those benefits offered as part of a comprehensive medical plan or
managed care plan. Examples of health benefits include inpatient and outpatient hospital care,
physician services and office visits, surgery, prescription drugs, dental and vision care.

Qualifying Events and Length of Continuation Coverage
Under Minnesota Continuation Law and COBRA, an employee and his or her dependents are
allowed to continue coverage for a period of 18 months when one of the following qualifying
events occurs:
• A reduction in the employee’s work hours (including strikes or layoffs); or
• Voluntary or involuntary termination of the employee for reasons other than gross misconduct.

   Minnesota law further requires that employees whose coverage would end due to voluntary or
   involuntary termination or a reduction in hours be allowed to continue group life insurance
   until coverage is obtained under another group plan, or until 18 months after the qualifying
   event occurs, whichever is shorter.

In the instance of divorce, legal separation or death of the employee, Minnesota law allows a
spouse and/or dependent child to continue coverage until:
• Coverage is obtained under another group plan; or
• Until coverage would otherwise end under the plan

   COBRA only provides a maximum 36 months in these instances. In these situations,
   Minnesota law provides more comprehensive continuation rights to spouses and dependents
   than does COBRA.

Minnesota Continuation Law and COBRA also differ in the instance of disability. Minnesota law
allows a disabled employee to continue coverage for the entire period of time during which they
are totally disabled. Total disability is defined as:
• The inability to perform the duties of the employee’s own occupation within the first two
    years; and
• After the first two years, the inability to perform any occupation for which the person is
    educated or trained

   Under COBRA, if an employee or his or her dependent become disabled, as defined by the
   Social Security Act, within 60 days following the employee’s termination of employment or
   reduction in hours, then coverage may be continued for up to 29 months (standard 18 months
   plus an additional 11 months).

   In the instance of family coverage, if the disabled member (either the employee, spouse or
   dependent child) does not elect to continue coverage for the additional 11 months, each other
   member can individually elect whether or not they wish to continue coverage for an additional
   11 months.

   In these cases the definition of disability, the qualified beneficiary (employee, spouse and/or
   dependents), and the coverage allowed differ between Minnesota law and COBRA. Instances
   of disability should be reviewed carefully at the city level to assure appropriate compliance.

Continuation coverage begins on the date when coverage would have terminated as a result of the
qualifying event and ends when one of the following occurs:
• The last day of maximum coverage is reached;
• Premiums are not paid on a timely basis;
• The employer ceases to maintain any group health plan;
• Coverage is obtained with another employer group health plan that does not contain any
   exclusion or limitation with respect to any pre-existing condition; or
• A beneficiary is entitled to Medicare. If a beneficiary has Medicare coverage before they elect
   COBRA, they can maintain both Medicare and the group coverage simultaneously. If they
   elect COBRA and subsequently become entitled to Medicare, then COBRA would terminate.

In most cases, Minnesota law requires that group health plans allowing continuation of coverage
also allow conversion to an individual policy for employees, surviving spouses and dependents
following any period of continuation of group coverage, and without evidence of insurability.

Notification of Qualifying Event and Right to Continue Coverage
Minnesota law does not include initial notice requirements, except where noted. Therefore, when
a qualifying event occurs, COBRA requires the following notices be provided within the allotted
time frame:
 The employer must notify the plan administrator within 30 days after an employee’s reduction
    in hours of employment, termination, death or Medicare entitlement that a qualifying event has
 The employee must notify the plan administrator within 60 days after a divorce, legal
    separation, or a child losing dependent status as defined by the health plan that a qualifying
    event has occurred.
 The employer must notify a qualified beneficiary of their right to continue coverage within 10
    days under Minnesota law, or 14 days under COBRA, of being notified that a qualifying event
    has occurred. In addition, notice of an individual’s right to continue coverage should provide
    their rights under Minnesota continuation law and COBRA, when necessary.

   A qualified beneficiary has 60 days from the date of the qualifying event or the date of the
   notice, whichever occurs later, to elect to continue coverage.

   COBRA provides that for family coverage, if the employee declines to continue coverage, each
   dependent has the option of continuing individual coverage. An election by the employee to

    continue coverage may be deemed to be an election for all dependents residing with the

Paying for COBRA Coverage
   Those individuals continuing under Minnesota law or COBRA may be required to pay the
    entire premium for coverage, including any contribution formerly provided by the employer.
    In most cases, premiums may not exceed 102% of the cost for active employees.

    However, disabled employees eligible under the Minnesota Continuation Law are not required
    to pay more than 100% of the premium. If any qualified beneficiary is disabled according to
    Social Security, COBRA allows for premiums to be increased to 150% for months 19-29.
    However, in the instance of family coverage, if the disabled individual does not elect to
    continue coverage but an individual family member wishes to continue coverage for the
    additional 11 months, the plan can only charge 102% of the total premium.
   Both Minnesota law and COBRA require that qualified beneficiaries be allowed to pay
    premiums on a monthly basis. However, Minnesota law does not address the time frame in
    which premiums should be paid. Under COBRA, premium payments must be made within the
    following time frames:
   The first premium payment must be made within 45 days after the date of electing coverage.
   After the initial payment, premiums are due on the date stated in the plan with a minimum 30-
    day grace period.
   The due date may not be prior to the first day of the period of coverage.
   The plan is not obligated to send out monthly premium notices.
   The city may discontinue coverage if the former employee fails to make the premium payment
    within the deadline provided under COBRA. However, Minnesota law does require that a 30-
    day notice be provided before coverage can be terminated for nonpayment of premium.
    Therefore, cities may want to send notice as soon after the premium was due to avoid having to
    continue coverage beyond the 30-day period.

If an employer fails to provide appropriate notices or forward appropriate payments to the insurer
or trust administrator, then the employer is liable for the employee’s coverage to the same extent
as if coverage were still in effect.

Summary of COBRA and Minnesota Continuation Law
For a summary overview of the requirements under both COBRA and Minnesota Continuation
Law, see the following chart on the next page. Remember that, in most cases, Minnesota law is
more restrictive for cities and insurers. Generally, if a city is complying with Minnesota
continuation requirements, then they will be in compliance with COBRA. Where Minnesota law
is silent, COBRA regulations apply.

The U.S. Department of Health and Human Services (HHS) is responsible for COBRA compliance
for federal, state and local governmental entities. However, the U.S. Department of Labor (DOL)
also provides guidance, which HHS may rely on for public sector entities. Additional information

may be obtained on the HHS web site at or
the DOL web site at

The League’s HR & Benefits Department is also available to help. For questions, e-mail
HR& or call 800-925-1122.

                             Qualified            Federal            Minnesota Continuation
 Qualifying Event            Beneficiary          COBRA              Law

 Voluntary or involuntary    Employee             18 months at       Same as COBRA
 termination (other than for Spouse               102% of
 gross misconduct), or       Dependent Child      premium
 Reduction in hours
 (including strikes or

 Divorce/legal separation;   Spouse               36 months at       Until covered under
 or                          Dependent Child      102% of            another group plan or date
 Death of covered                                 premium            coverage would otherwise
 employee                                                            end

 Loss of “dependent child”   Dependent Child      36 months at       Same as COBRA
 status                                           102% of

 Employee entitled to        Spouse               36 months at       Same as COBRA
 Medicare                    Dependent Child      102% of

 Disability                  Employee             18 months at       Totally disabled at 100%
                             Spouse               102% of            of premium
                             Dependent Child      premium,
                                                  additional 11
                                                  months at 150%
                                                  of premium

HR & Benefits 03/2009


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