George L. Chimento
                  July 9, 2009


Thanks to my friend and colleague,
Kevin Hokanson of the Eastern Benefits
Group, for calling this to my attention so promptly.


The American Recovery and Reinvestment Act of 2009 ("ARRA") was enacted
on February 17, 2009 and gave a nine month 65% federal subsidy to
involuntarily terminated employees, their COBRA beneficiaries at the time of
the termination, and children born or adopted after that date. In
COBRA-speak, these are assistance eligible individuals ("AEIs"). The 65% ARRA
subsidy even covered AEIs of businesses that are too small (less than 20
employees) to be covered by federal COBRA, provided the employer was in a
state like MA which has a "mini-COBRA" statute that is similar to COBRA.

ARRA also gave "second chance" enrollment rights to AEIs if involuntary
termination occurred during the period September 1, 2008 through February
16, 2009, and if these persons either had not elected COBRA or had dropped
COBRA. The federal second chance election would allow coverage to start on
the first coverage period on or after February 17, 2009, which usually meant
March 1, 2009.

ARRA made it optional with the states to provide these "second chance"
enrollment rights in their mini-COBRA statutes.
Our neighbors (NY, RI, CT, and
NH) did that right away, either with legislative action or fiat from the state
insurance commissioner. MA lagged, leaving many persons, who were
terminated involuntarily and who had dropped or declined COBRA, without
"second chance" enrollment rights.

Section 41 of Senate Bill No 2101, enacted on July 2, 2009, finally adds
"second chance" rights to MGL Ch. 176J, Section 9, the
mini-COBRA statute.  

The details

A second chance mini-COBRA enrollment in MA will be effective as of August 1,
2009 (or, if earlier, the first billing cycle starting on or after July 2, but August 1
is the date for most small groups). It can last for the duration of the 18 month
period that would have applied if mini-COBRA had been elected at the time of
the involuntary termination. Notification of this new right is required within 60
days of the new MA law's enactment on July 2, 2009. Small employers should
coordinate with their insurers immediately to determine whether the carrier will
send the notice or whether the employer is stuck with that chore.

Provided that the employer properly identifies the AEIs, its duties will be the
same as for other mini-COBRA terminations, where it functions as the carrier's
delegate. It will collect the signed election forms for the carrier; it will also
collect the COBRA premium and forward it to the carrier. (In some states,
insurance companies do more of the work, but MA carriers are permitted to
delegate under our mini-COBRA statute.) Because this is all new, small MA
employers should check with their carrier to be clear about who does what,
just in case the carrier decides to assume more of the burden for this new law.

If the AEI is eligible for the 65% federal COBRA subsidy, the small employer
that collects the 35% does not have to advance the remaining 65% to the
carrier, as is the case with federal COBRA. Instead, the carrier is expected to
cover the 65%, and it will then file for reimbursement with the US Treasury.

Finally, if the AEI does not have rights to the 65% subsidy (because of
eligibility for other group insurance), he or she may still elect full-priced
"second chance" coverage, provided there is no other coverage actually in
The full text of Section 41:

SECTION 41. Notwithstanding any general or special law to the contrary, a
carrier offering continuation coverage under a health benefit plan issued
pursuant to chapter 176J of the General Laws to a qualified beneficiary eligible
for the COBRA premium assistance benefit set forth in section 3001 of the
American Recovery and Reinvestment Act of 2009 shall offer the extended
election period available therein to each qualified beneficiary who does not
have an election of continuation coverage under a health benefit plan issued
under said chapter 176J on the effective date of this act, but who would be an
assistance-eligible individual under the American Recovery and Reinvestment
Act if such election were in effect. Any such qualified beneficiary may elect such
continuation coverage under said chapter 176J during the period beginning on
the effective date of this act and ending 60 days after the date on which the
notification required under this section is provided to such qualified beneficiary.
Coverage elected in this extended election period shall commence with the
first period of coverage beginning on or after the effective date of this act. For
the purposes of this section, carriers or their designees shall comply with
paragraph (5) of subsection (j) of section 9 of said chapter 176J and any
applicable notice requirements under American Recovery and Retirement act of
2009, except that such notice shall be made within 60 days after the effective
date of this act.

This article is provided as a courtesy and may not be relied upon as legal
advice, or to avoid taxes and penalties. Distribution to promote, market, or
recommend any arrangement or investment to avoid or evade taxes, including
penalties, is expressly forbidden. Any communication with the author as to its
contents, does not, of itself, create a lawyer-client relationship. Under the
ethical rules applicable to lawyers in some jurisdictions, this may be considered

[return to]