COBRA COMPLIANCE

There is no federal or state law that requires employers to provide employees with healthcare insurance, townships may choose to do so by ordinance. Townships that offer group health insurance may need to provide a temporary continuation of coverage required by the Consolidated Omnibus Budget Reconciliation Act (COBRA) that otherwise might be terminated based on a qualifying event as described below.

Covered Employees

COBRA covers group health plans sponsored by an employer (private or state/local government) that employed at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. The township may count the number of employees on a daily basis or on a pay-period basis.

Counting Employees

Both full-time and part-time employees are counted.  Each full-time employee is counted as one employee and each part-time employee is counted as a fraction of a full-time employee (FTE).  For example, if 37 hours per week is considered full-time, a part-time employee that works 20 hours per week would count as .54 of an FTE (20/37 = .54).

All "common law employees," not independent contractors, as defined by the IRS, are counted for purposes of determining whether the township has 20 employees.  Common law employees may include, but are not limited to, elected officials, assessors, members of boards and commissions, and appointed officials; however, they must have also worked more than 50 percent of the township's typical business days in the previous calendar year based on a daily basis or a pay-period basis.

Group Health Plans

Under COBRA, a group health plan is any arrangement that a township establishes or maintains to provide employees or their families with medical care, whether it is provided through insurance, by a health maintenance organization, out of the township's assets on a pay-as-you-go basis, or otherwise.

Medical Care

Medical care includes:

1. Inpatient and outpatient hospital care
2. Physician care
3. Surgery and other major medical benefits
4. Prescription drugs
5. Dental and vision care

Neither life insurance or disability benefits are considered "medical care."

Qualifying Event

Qualifying events are events that cause an individual to lose his or group health coverage.

• For a covered employee:
  • Termination of the employee's employment for any reason other than "gross misconduct;" or
  • Reduction in the employee's hours of employment.
• For a spouse or dependent child:
  • Termination of the employee's employment for any reason other than "gross misconduct;"
  • Reduction in the hours worked by the covered employee;
  • Covered employee becomes entitled to Medicare;
  • Divorce or legal separation of the spouse from the covered employee;
  • Death of the covered employee; or
  • Dependent child ONLY--loss of status under the plan rules.

Paying for Continuation of Coverage (Voluntary Termination of Coverage)

Townships can require qualified beneficiaries to pay for COBRA.  The amount charged to qualified beneficiaries cannot exceeed 102 percent of the cost of the plan for similarly situated covered employees.

Paying for Continuation of Coverage (Involuntary Termination of Employment)

Effective February 17, 2009, the American Recovery and Reinvestment Act of 2009 amended COBRA retroactively to September 1, 2008, through December 31, 2009.  These amendments create additional COBRA notice requirements [click here for more information]; effects payroll tax administration in order to administer a federal subsidy of COBRA premiums for the township [click here for more information]; and allows assistant eligible individuals to pay 35% with the township paying the remaining 65% of the applicable COBRA premium [click here for more information].

Notices, Duration of Coverage and Other Detailed Information for Administering COBRA

COBRA as it affects public-sector health plans is regulated by the Centers for Medicare and Medicaid Services a division of the U.S. Department of Health and Human Services.  Further guidance for administering COBRA can be obtained by clicking [here].