1. BENEFITS UPDATE
WEEK OF JUNE 29, 2009
Texas State Continuation Coverage Extended Temporarily for Small Groups
Texas state continuation can be continued for up to nine months for employees of small employers and
their families where coverage was terminated except for involuntary termination for cause. Also, there is a
special enrollment period opportunity for those involuntary terminated except for cause between
September 1, 2008 and December 31, 2009.
This is effective June 19, 2009 and expires September 1, 2013.
The new provisions do not apply to groups subject to COBRA. They apply to insured and HMO plans and
not self-funded plans.
Presumably, this change was made in order for employees to take full advantage of the American
Recovery and Reinvestment Act of 2009 (“ARRA”) premium subsidy. However, due to the fact that an
individual must not be terminated for cause for Texas state continuation purposes, it appears that
eligibility for the subsidy and the special enrollment period will be quite limited. See the Eligibility Table
section.
The following provides additional detail:
Background
Texas Continuation
Texas requires Texas group policies providing hospital, surgical, or major medical coverage to extend
coverage to employees and their spouses and dependents in a manner similar to that required under
COBRA. It does not apply to self-funded plans.
An employee, spouse, or dependent who was covered for 3 consecutive months where coverage was
terminated except for involuntary termination for cause are eligible to continue benefits.
The premium charged to the continuee is the premium amount plus a 2% administrative fee.
Continuation expires upon the earliest of:
• six months after the date the election is made (starting after COBRA, if applicable);
• the date the participant fails to make timely premium payments;
• the date the participant is covered for similar benefits under another plan; or
• the date the participant is eligible for similar benefits under another group plan, under Medicare, or
under any state or federal law.
ARRA
The ARRA provides premium assistance with respect to COBRA as well as with respect to insured State
programs that provide continuation coverage (“mini-COBRA coverage”) with coverage comparable to that
This Benefits Update is intended to convey general information and may not take into account all the
circumstances relevant to a particular person’s situation.
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2. offered under COBRA as follows:
• Employees involuntarily terminated from September 1, 2008 to December 31, 2009 and their
family members will only have to pay 35% of the premium amount (rather than the usual 100-
102%) for up to 9 months to continue group health coverage.
• Carriers will pay 65% of the premium amount, then take a payroll tax credit for that amount.
• The same health coverage the individual had at the time of the qualifying event will generally be
offered in accordance with State law, but other less expensive health coverage options may be
offered.
• A State may choose to provide an additional election period in its continuation coverage program
for individuals involuntarily terminated from September 1, 2008 through February 16, 2009.
• If the premium subsidy is provided to high income individuals, then their income tax will be
increased by the amount of the subsidy.
• Updated election notices must be provided by carriers.
New Texas Provisions
The provisions described below are effective immediately for Texas state continuation purposes for
groups not subject to COBRA.
Extension of Continued Coverage
An employee, spouse, or dependent who was covered for 3 consecutive months where coverage was
terminated except for involuntary termination for cause can continue benefits until the earliest of:
• nine months after the date the election is made;
• the date the participant fails to make timely premium payments;
• the date the group coverage terminates in its entirety;
• the date the participant is covered for similar benefits under another plan; or
• the date the participant is eligible for similar benefits under another group plan, under Medicare,
or under any state or federal law.
Special Enrollment Period
An employee, spouse, or dependent who was covered for 3 consecutive months:
• whose involuntary termination occurred, other than involuntary termination for cause, from
September 1, 2008 through February 16, 2009; and
• who did not elect coverage (or who did, but let it lapse)
(an “extended election eligible individual”) has a second chance to elect coverage.
The period of continuation coverage begins with the first period of coverage beginning on or after June
19, 2009 (generally, July 1, 2009) and does not extend beyond the date the period of continuation
coverage would have ended if the coverage had been elected during the election period required under
the law as it existed before.
The period beginning on the date the individual first became eligible for continuation coverage and ending
on July 1, 2009 is disregarded for purposes of determining preexisting condition exclusions.
This Benefits Update is intended to convey general information and may not take into account all the
circumstances relevant to a particular person’s situation.
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3. A carrier or employer 1 must provide notice to any former employee, spouse, or dependent, who is an
extended election eligible individual by August 19, 2009 that includes:
• a description of the extended election period;
• a description, displayed in a prominent manner, of the individual's right to a reduced premium and
any conditions on entitlement to the reduced premium under ARRA;
• a form that allows the individual to request treatment as an assistance eligible individual, as
defined by ARRA to whom the premium subsidy would apply;
• the amount continuation coverage will cost and the period of coverage available;
• an election form that includes the return address and the due date for making the election; and
• notice that if the individual is entitled to the reduced premium and later becomes eligible for other
group health plan coverage or Medicare, the individual must notify the employer in writing or the
individual may be subject to a tax penalty.
An employee, spouse, or dependent must provide to the employer a written request for continuation of
group coverage by the 60th day after the date the individual is given notice of the right to continuation.
Payment must be made not later than the 45th day after the date of the election for coverage and on the
due date of each payment thereafter. Following the first payment made after the initial election for
coverage, the payment of any other premium shall be considered timely if made on or before the 30th day
after the date on which the payment is due.
Eligibility Table
Texas State Texas State Texas Special ARRA Subsidy
Continuation – 6 Continuation – 9 Enrollment Period
months months
Eligibility Employee, spouse, or Employee, spouse, or An employee, spouse, or Qualified beneficiary
dependent who: dependent who: dependent who (employee, opposite sex
• was covered for 3 • was covered for 3 • was covered for 3 spouse, or dependent
consecutive months; consecutive months; consecutive months; child covered by the
and and and group health plan on the
• coverage was • coverage was • whose involuntary date of the qualifying
terminated except for terminated except for termination occurred, event) where:
involuntary involuntary other than involuntary • the qualifying event
termination for cause. termination for termination for cause, causing loss of
cause; and from September 1, coverage is
• the employer is not 2008 through involuntary
subject to COBRA. February 16, 2009; termination of
and employment
• who did not elect (excluding
coverage (or who did, termination of
but let it lapse); and employment for
• the employer is not gross misconduct);
subject to COBRA. and
• the qualifying event
occurs during the
period beginning
September 1, 2008
and ending
December 31, 2009.
(There is also Texas state continuation for up to 3 years for small groups available to a spouse or dependent who:
• was covered for 1 year or is an infant < 1 year of age; and
• there has been death or retirement of the employee or severance of the family relationship.)
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The law indicates that sending the notice is a carrier or employer responsibility. If either party gives the notice, the requirement will
be satisfied. Any state law that requires employer involvement with respect to an ERISA plan would clearly seem to be preempted
although there is no authority so confirming.
This Benefits Update is intended to convey general information and may not take into account all the
circumstances relevant to a particular person’s situation.
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4. For a copy of the law, visit: http://www.legis.state.tx.us/tlodocs/81R/billtext/doc/SB01771F.doc
This Benefits Update is intended to convey general information and may not take into account all the
circumstances relevant to a particular person’s situation.
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