As small business employers and benefits managers, staying compliant with employment laws is a key part of your success. One area that deserves special attention is health insurance continuation coverage, specifically the mini-COBRA laws. While most of us are familiar with the federal COBRA law, which requires employers with 20 or more employees to offer continued health coverage after job loss or another qualifying event, many small businesses fall under the purview of state-level mini-COBRA laws.
Mini-COBRA laws apply to employers with fewer than 20 employees, offering similar benefits but with important distinctions in each jurisdiction. Here’s a breakdown of what small business employers in Virginia, the District of Columbia (DC), and Maryland should be aware of.
Virginia Mini-COBRA
Virginia’s health insurance continuation coverage law is relatively straightforward. Employers with two or more, but fewer than 20, employees must offer continued health coverage to employees who experience a qualifying event, such as termination (except for gross misconduct) or a reduction in hours. Coverage must be offered for a minimum of 12 months.
Key points to consider:
Notice requirements: The employer must provide notice to the former employee within 14 days of the qualifying event, and the employee has 31 days to elect coverage and must pay the premium within 45 days of coverage termination.
Coverage details: Employers should ensure that the same benefits provided under the group health plan are continued, although the former employee will be responsible for paying the full coverage premium.
Termination of coverage: Coverage may end sooner than 12 months, if the employee becomes eligible for another group plan or Medicare.
For small employers in Virginia, the administrative burden is lower compared to federal COBRA, but failing to provide proper notice or coverage could lead to legal exposure.
District of Columbia Mini-COBRA
In DC, mini-COBRA applies to employers with 2 to 19 employees and provides up to 3 months of continuation coverage for employees who lose their jobs (for reasons other than gross misconduct).
Key points to consider:
Notice obligations: Employers must notify employees of their continuation rights within 15 days of a qualifying event.
Election period: Employees have 45 days after the date that coverage would otherwise terminate, with coverage starting immediately after the qualifying event if elected.
Cost: Employees are responsible for the entire coverage premium, which cannot exceed 102% of the premium for the plan.
For DC-based employers, it’s important to recognize that the timeline for coverage is short, which means benefit managers should be clear when communicating this to employees.
Maryland Mini-COBRA
Maryland offers one of the most robust mini-COBRA laws in the region, applying to employers with 2 to 19 employees. The continuation coverage must be provided for up to 18 months, a period more akin to federal COBRA coverage.
Key points to consider:
Notice requirements: Employers must notify employees within 14 days and the employer shall deliver or send or send by first-class mail an election notification form to the employee. The employee has 45 days from the date of the qualifying event to elect coverage.
Premiums: Employees can be charged up to 102% of the group plan’s coverage cost.
Extensions: If the employee is deemed disabled under the Social Security Act at the time of the qualifying event, they may be eligible for up to 29 months of coverage.
Coordination with federal COBRA: If an employee is eligible for federal COBRA through another job or plan, Maryland’s mini-COBRA doesn’t apply.
For employers in Maryland, this extended coverage means potentially higher administrative burdens. Ensuring that employees understand their rights and responsibilities is crucial to maintaining compliance.
Practical Considerations for Small Businesses
While mini-COBRA laws provide critical healthcare continuation coverage options for employees, they can pose challenges for small employers and benefit managers.
1. Clear Communication: Employees often have little knowledge of their continuation rights under mini-COBRA. Benefit managers should ensure clear communication of the election period, premium costs, and how long the coverage will last.
2. Timely Notices: Failure to provide timely notice of continuation coverage can result in penalties. Keep track of key deadlines — like the 14-day requirement in Virginia —and ensure that notices are sent out promptly.
3. Cost Management: Mini-COBRA allows employers to pass the full cost of the premium onto the former employee, but managing these payments can be complex. Establishing a streamlined process for collecting premiums can reduce administrative headaches.
4. Vendor Coordination: If you use a third-party administrator (TPA) for benefits management, ensure they are well-versed in the mini-COBRA statutory requirements in your jurisdiction to avoid non-compliance.
5. Health Plan Review: Regularly reviewing your health plans with legal counsel can ensure that your benefits offering meets both state and federal requirements.
Mini-COBRA is an essential safety net for employees, but for small businesses, understanding and managing these laws is key to staying compliant and avoiding costly penalties. Taking the time to ensure your continuation coverage processes are in order will not only protect your business but also show your employees that you value their well-being.
If you have questions about mini-COBRA laws, please contact Doug Taylor at (703) 525-4000 or rdougtaylor@beankinney.com.
This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.