Minnesota has enacted a new law to provide a state subsidy to some former employees eligible for the federal COBRA subsidy. The new law is an attempt to avoid the cost of these former employees applying for health insurance under a state program. This new law is significant to employers because it requires employers with employees in Minnesota to provide those employees with notice of the Minnesota subsidy.

Background

The law provides that a former employee or dependent is eligible for the Minnesota subsidy if the individual (i) is an assistance eligible individual (an “AEI,” an individual eligible for the 65% federal COBRA subsidy), (ii) elects COBRA, and (iii) is “eligible for medical assistance under Minnesota Statutes, chapter 256B; general assistance medical care under Minnesota Statutes, section 256D.03; or MinnesotaCare under Minnesota Statutes, chapter 256L, except for the four-month barrier requirement under Minnesota Statutes, section 256L.07, subdivision 3.” See H.F. 1362, Art. 5, Sec. 78, subd. 1, enacted May 14, 2009. See https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=H1362.4.html&session=ls86

The law provides that an individual is eligible for the Minnesota subsidy for only so long as the individual is eligible for the federal COBRA subsidy. The law provides that the state will pay the subsidy directly to the entity to which the individual is to pay COBRA premiums (typically the employer) and does not provide for reimbursement of payments made by individuals.

Notice Requirement

The new law requires employers to provide notice of the state subsidy:

All employers and plan administrators who are required to provide notice to all qualified individuals under the American Recovery and Reinvestment Act of 2009 must include information to qualified individuals residing in Minnesota of the availability of the state subsidy available under this section. The notice shall include the eligibility requirements for the state subsidy and that the individual must apply to the commissioner of human services to receive the state subsidy.

See H.F. 1362, Art. 5, Sec. 78, subd. 3(A) (2009). Unfortunately, the law does not define the term “qualified individual,” so it is not clear if the notice is to be given to all employees and their dependents covered under an employer’s health plan or only to AEIs. In addition, the law does not include an effective date. Minnesota law and a fiscal note from the Department of Human Services indicate that the appropriations portion of the law is effective July 1, 2009, but it is not clear if the notice requirement is effective earlier. Given the uncertainty, employers should consider modifying their COBRA election notices now to provide notice of the Minnesota subsidy.

Potential ERISA Preemption

ERISA preemption with respect to state law is complex. In general, ERISA preempts state laws that relate to ERISA covered plans. See 29 U.S.C. § 1144 (ERISA § 514) 2006. In 1996, the Department of Labor issued an opinion that indicated the portion of a Minnesota state law requiring an employer to provide notice of state life insurance continuation rights was preempted by ERISA. See ERISA Opinion Letter 96-03A (Feb. 20, 1996). An employer should consult with an attorney as to whether ERISA preemption applies to the notice requirement with respect to the Minnesota subsidy. Note: ERISA preemption is generally not available to governmental plans and church plans.

Changes Also Made to Minnesota’s Continuation of Coverage Law
This session Minnesota also enacted legislation that amended Minnesota’s laws governing continuation of coverage. One change added an extension of the continuation of coverage election period similar to the extension under the American Recovery and Reinvestment Act. See https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S1904.2.html&session=ls86. This was effective May 7, 2009. Another change added a provision that provides if an employer maintains a group health plan that is not subject to the COBRA continuation provisions under the Internal Revenue Code, ERISA, or the Public Health Services Act, then the employer is to provide notice to the health carrier if an employee is terminated or laid off. See https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=H1853.3.html&session=ls86. This was effective May 22, 2009.

Conclusion
The new law providing for the state subsidy leaves open many questions, the most pressing of which are the content and timing of the notice to be provided to employees. If you wish to discuss the requirements of the law and whether ERISA preemption may apply to the notice requirement, please contact the attorney in the Benefits and Compensation practice group with whom you work.

Disclaimer
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