A new law requires New York employers with insured
medical plans to change their practices for the provision of
post-employment health coverage. New York employers with 20 or more
employees have, until now, been required to comply with federal
COBRA, but not with New York state law, when making
continued medical coverage available after a job loss or other
qualifying event. Employers with fewer than 20 employees were
subject to New York's separate
"mini-COBRA" law that was enacted earlier this
year. However, the rules changed at the end of July 2009; employers
with 20 or more employees must now accommodate coverage
continuation rights granted by recent amendments to the New York
Insurance Law regardless of the number of employees. In some cases,
the changes may be retroactive to July 1, 2009.
Employers should try to coordinate the new rules with any
applicable federal COBRA requirements and make sure that their
summary plan descriptions, election forms and other communications
given to terminated employees accurately reflect the new extended
periods for coverage. The new law creates special challenges for
multi-state employers and also for employers with both self-funded
and insured plans at one or more worksites; these employers must
follow different rules for their New York insured plans and must
also decide whether to voluntarily extend these rights to the
Post-Employment Coverage Period Extended to 36 Months
New York law will now provide for a continuation coverage period
up to 36 months following a job loss, which is double the period
provided under federal COBRA if there is no other qualifying event.
Unlike the subsidy provisions of the American Recovery and
Reinvestment Act of 2009 (ARRA) which extend special rights only if
employment has been involuntarily terminated, the New York law
applies regardless of the reason for the job loss. This provision
is intended to permit qualified beneficiaries who have exhausted
their federal COBRA continuation rights to elect up to an
additional 18 months of continuation coverage under New York
The new continuation coverage requirements are effective for
contracts issued, renewed, modified or amended after June 30,
Longer Coverage Options for Unmarried Children
The new law requires insurers to offer employers a dependent
coverage option permitting unmarried children who are not covered
by an employer or government plan (such as Medicare) to continue to
be covered under a parent's group health insurance policy
through age 29, regardless of financial dependence. The typical
policy before this change provided that such children became
ineligible for coverage on college graduation or
attainment of an earlier age, such as age 23. The employer is not
required to offer or pay for this coverage; but, if the employer
elects not to include this option in its plan, the insurer
must make available the option to purchase this coverage during
statutory election periods, including during open enrollment.
The new dependent requirements are effective for contracts
issued, renewed, modified or amended after August 31, 2009.
Employer Action Plan
Employers will need to decide whether to provide optional
dependent coverage. They will also have to use their best efforts
to coordinate the New York and federal COBRA requirements
applicable to them to make sure that they provide elections at the
proper times and describe the election rights accurately in the
absence of guidance clarifying the interaction between the two
laws. Employers with operations in New York and other states may
wish to develop special New York notices of continuation coverage.
It is also important to consider whether these new rights impact
any provisions of an employer's cafeteria plans or other
related benefit plans not directly covered by the new law. Finally,
employers with both insured and self-funded plans should consider
the cost implications (including possible adverse selection) of
extending COBRA coverage voluntarily under their self-funded
Although it is possible that this new law might be challenged as
preempted to the extent that it applies to employers subject to
federal COBRA, there is an exception to preemption for state laws
regulating insurance. Since it is unlikely that any challenge would
be resolved before compliance is required and it is unclear whether
such challenge would succeed, we recommend that preparation for
compliance start now.
Carol Buckmann is Counsel in the firm's
New York office, practising in the Pensions and Benefits
Department. Sandra Cohen is a partner in the
firm's New York office practising in the Pensions and Benefits
Department, with a cross-appointment to the Tax Department.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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