New York State Insurance Law Extends Continued Health Coverage From 18 Months to 36 Months and Dependent Health Coverage Through Age 29August 12, 2009
On July 29, 2009, New York State Governor Paterson signed three bills into law that amend the New York State Insurance Law to improve access to health care and to make health insurance more affordable.
- The first law extends continuation coverage for loss of coverage due to termination of employment or a reduction in work hours under health insurance contracts from 18 months to 36 months. This change is effective for contracts issued, modified or renewed on or after July 1, 2009 and applies to:
- employers subject to the federal Consolidated Omnibus Budget Reconciliation Act ("COBRA") to the extent individuals have exhausted their coverage under federal COBRA, and
- employers subject to New York State mini-COBRA coverage.
- The second law requires health insurance contracts issued, modified or renewed on or after September 1, 2009 to allow continued dependent coverage to unmarried children under their parents' policy through age 29, subject to certain requirements described below.
- The third law institutes a series of managed care reforms.
This Client Alert provides a summary of the first two changes with respect to continuation coverage and dependent coverage. For a summary of the changes with regard to managed care reform, please see the Client Alert to be issued by our Health Care and Life Sciences Practice Group.
Continuation Coverage Extended From 18 Months to 36 Months
Sections 3221, 4304 and 4305 of the New York State Insurance Law were amended to require commercial insurers offering group policies, not-for-profit corporations and health maintenance organizations ("HMOs") offering group contracts (and group remittance contracts) to extend the duration of continuation of health coverage from 18 months to 36 months following a loss of coverage due to termination of employment or a reduction in work hours.
The continuation requirements of the New York State Insurance Law are applicable to individuals covered under insured group policies, and group remittance contracts or group contracts that are not subject to federal COBRA law (generally, small employers with less than 20 employees) and provide continuation coverage in the event of termination of employment, reduction in work hours or loss of eligibility (known as the "New York mini-COBRA"). Under the prior New York State Insurance Law, the period of such coverage was either 18 months, or for dependents losing coverage due to divorce, separation or aging off a parent's policy, 36 months.
The new law requires insurers to allow workers, regardless of the size of their employer, to extend their health insurance continuation coverage from 18 months to 36 months in the event of a loss of coverage due to termination of employment or reduction in work hours. This appears to apply to anyone covered by these insurance contracts issued in New York. Although there are references in the bill summaries to the COBRA subsidy available under the American Recovery and Reinvestment Act of 2009 and the New York State Insurance Law, and there has been commentary regarding the purpose behind the enactment of these changes, the extension of coverage appears to apply to terminations of employment that are both "voluntary" and "involuntary."
The new law also is significant in that it expands on federal COBRA requirements by requiring a group policy, group remittance contract or group contract to offer an insured who has exhausted continuation coverage under federal COBRA the opportunity to continue coverage for up to 36 months from the date the coverage began. This rule applies only if the individual was entitled to less than 36 months of continuation benefits under federal COBRA. The provision does not appear to limit the reason for the qualifying event under federal COBRA.
Dependent Health Coverage Must Be Offered Through Age 29
Sections 3216, 3221, 4235, 4304 and 4305 of the New York State Insurance Law were amended to require commercial insurers offering individual and group health policies, not-for-profit corporations and HMOs offering group health contracts (and group remittance contracts) to extend an option to continue coverage to unmarried children who would have "aged off" their dependent coverage under their parents' policy through age 29, provided certain requirements are met. In addition, the new law requires commercial insurers to make this extended coverage available to consumers purchasing individual health policies. Employers are not required to cover the cost of the extended dependent coverage.
Under the new law, individual and group insurance policies, group remittance contracts and group contracts must extend this coverage through age 29 to children who (i) are unmarried, (ii) do not have other employer sponsored coverage, (iii) live, work or reside in New York State or the service area of the insurer and (iv) are not eligible for Medicare. This applies to children regardless of their financial dependence.
An employee, group member or dependent child will be permitted to elect the extended coverage (i) within 60 days following the date coverage would otherwise terminate due to age, (ii) within 60 days of qualifying as a dependent child or (iii) during an annual 30-day open enrollment period. Dependent children whose coverage terminated prior to the effective date of the new law will have a period of 12 months from the new law's effective date to elect coverage. If coverage is under an individual health insurance policy, the election must be provided upon the inception of a new policy and on the first anniversary date of an existing policy following the new law's effective date.
Implications for Employers
The extension of continuation coverage from 18 months to 36 months is effective for all covered contracts issued, renewed, modified, amended or altered on or after July 1, 2009, and the extension of dependent coverage through age 29 is effective for all covered contracts issued, renewed, modified, amended or altered on or after September 1, 2009.
This legislation applies to group health coverage offered under certain insurance contracts subject to the New York State Insurance Law. It does not, however, extend to group health plans that are self-insured.
Employers should be aware of these new requirements upon issuance, modification or renewal of an insurance contract offering health coverage. Insurance contracts, summary plan descriptions, COBRA notices and New York mini-COBRA notices will need to be updated to reflect the new laws and there are additional administrative implications that each employer needs to evaluate depending on the design of its health plan. As the laws were recently enacted and given that many of the details are not clear, there could be additional guidance from the New York State Department of Insurance addressing the implications of these laws which could take the form of Circular Letters, Regulations or Counsel Opinions. Regardless of whether additional guidance is issued, these laws go into effect as cited above.
If you have any questions regarding this Client Alert, please contact the attorney in our Labor and Employment Group with whom you generally work, or feel free to contact either of the lawyers in the Group listed below: