Employers Must Be Aware of Changes to NJ COBRA Rules

The American Recovery and Re-Investment Act of 2009 (“ARRA”), enacted on February 17, 2009, made significant changes to federal COBRA, as previously reported on this blog. New Jersey employers with less than twenty (20) employees, who are subject to New Jersey’s mini-COBRA statute (“NJ COBRA”), should also be aware that the ARRA makes significant changes to NJ COBRA.

“Assistance eligible individuals” who elect COBRA (or NJ COBRA) may receive a government subsidy equal to 65% of their health insurance premium for up to nine (9) months and remain obligated to pay 35% of the premium. Under NJ COBRA, “an assistance eligible individual” is an individual who loses group health coverage because of an employee’s involuntary termination between September 1, 2008 and December 31, 2009 and who is otherwise eligible for New Jersey continuation coverage. Under New Jersey law, employees who are terminated for “cause” are not eligible for continuation coverage. The NJ COBRA premium subsidy is also not available if the individual’s income that year exceeds $125,000.00 for an individual filer and $250,000.00 for a joint filer. Finally, the NJ COBRA premium subsidy is not available if the employee is otherwise eligible for other insurance coverage, such as through a spouse’s plan or Medicare.

New Jersey’s small employers with less than 20 employees should be aware of their obligations to provide NJ COBRA notices to eligible employees. Employees who are involuntarily terminated between September 1, 2008 and February 16, 2009 must elect the subsidy no later than April 18, 2009. Those who are involuntarily terminated between February 17, 2009 and December 31, 2009 must elect New Jersey continuation coverage within thirty (30) days after their coverage ended due to an involuntary termination of employment. These individuals must also sign up for the subsidy within that same thirty (30) day period. This thirty (30) day period is different than the election period applicable to COBRA. 

Employers should also be aware that individuals who initially declined to elect group continuation coverage or initially elected coverage and then lost it due to their failure to pay premiums will have an additional opportunity to elect group continuation coverage and receive the subsidy. In this situation as well, individuals will have until April 18, 2009 to enroll. Coverage for eligible individuals who enroll will end on the date coverage would have ended had they initially elected continuation coverage following their termination. 

Unlike COBRA, under NJ COBRA only the person who is involuntarily terminated may make a continuation election, and not the employee’s dependents. 

Small employers should make note of those “take away” items referenced in the Firm’s March 6, 2009 posting on the ARRA and its impact on COBRA. Employers should also note that the Department of Labor has issued model forms for employers to use when notifying individuals of their rights under COBRA and NJ COBRA. These forms can be found at http://www.dol.govebfaCOBRA.html.