eInsurancePeople Frequently Asked Questions

Assistance Eligible Individuals who dropped continuation and bought individual plans who wish to return to New Jersey continuation with the premium reduction must complete the request form included with the notice. The continuation coverage will be retroactive to the date it was terminated. The Assistance Eligible Individual must pay the 35% premium for the time after the continuation ended with payment being made no later than February 17, 2010, or 30 days from receipt of the notice from the insurance company, whichever is later. Contact the insurance company that issued the individual plan to terminate the individual plan retroactive to the effective date. Premiums will be refunded. Any claims that were paid will be recovered. Those claims can be submitted under the New Jersey continuation plan.

What is NJ Continuation ?

NJ Continuation is a NJ State Law whereby employees who have terminated for other than cause or whose hours have fallen to below 25 hours per week and thereby lose their group medical coverage are eligible to continue on the group medical plan at their own expense.

The 2010 DOD Act (Department of Defense and Appropriations Act) and the Temporary Extension Act (TEA) signed March 3, 2010 allow a 65% premium subsidy for employees and their covered families who lose health coverage due to an involuntary termination between September 1, 2008 and March 31, 2010.

H.R. 4851 was signed by President Obama on April 15. It extends premium assistance to involuntary terminations through May 31, 2010

To which employers does this apply ?

This applies to any size insured group in the 2-50 eligible employee market to whom Federal COBRA does not apply, including non-profit organizations.

An example of this might be with Churches, which are eligible for NJ Continuation where they are not with COBRA.

Another example is when a group has not had 20 or more employees for 50% of the preceding year.

Persons who were involuntarily terminated between September 1, 2008 and May 31, 2010 may be eligible for a continuation premium subsidy. The Assistance Eligible Individual pays 35% of the premium and the carrier subsidizes the 65% and is reimbursed via payroll taxes on their Form 941. The subsidy is for a maximum of 15 months and ends when 1-the individual becomes eligible for any other group health plan (regardless of cost), 2- eligible for Medicare, or 3- the 18 months from the original termination date has expired. Each termination event would qualify the AEI for a 15 month subsidy.

TEA also states that persons who are involuntarily terminated between March 2 and 31 who experienced a reduction of hours between Sept 1, 2008 and March 31, 2010 are subsidy eligible. The 18 month continuation clock begins at the time of reduction of hours. This does not extend the maximum 15 months of subsidy allowance.

What if a New Jersey small employer refuses to provide New Jersey Continuation coverage or fails to provide notice of the subsidy?

The New Jersey Department of Labor and Workforce Development will take appropriate action in the event of an employer’s failure to comply with this law. Workers who have concerns about their employer’s compliance with New Jersey Continuation Coverage requirements under the ARRA may contact the New Jersey Department of Labor and Workforce Development, Division of Wage and Hour Compliance, in writing at P.O. Box 389, Trenton, NJ 08625-0389, by telephone at (609) 292-1704 or via e-mail at wage.hour@dol.state.nj.us. Workers whose employer is covered under federal COBRA should contact the U.S. Department of Labor, Employee Benefits Security Administration, at (866) 444-3272.

Please define Involuntary Termination (IT) in the context of ARRA (The American Recovery & Reinvestment Act of 2009).

From IRS Notice 2009-27

A severance due to the independent exercise of the authority of the employer, other than the employee’s explicit request
May include the employer’s failure to renew a contract if the employee was willing and able to execute a new contract.
If the termination constitutes a termination for good reason due to employer action that causes material negative change in the employment relationship for the employee.
Reduction of hours is not an IT. HOWEVER, the employee’s resulting termination may be IT.
Retirement is not an IT. However, if absent retirement, the employer would have terminated the employee, it is IT.
Clarified 6-4-2009 that an Involuntary Termination includes when a member of a military Reserve unit or the National Guard is called to active duty, regardless of whether the civilian employer otherwise treats the employee's absence as a termination of employment or a leave of absence.
Clarified 6-4-2009 that if an employer determines that an employee's termination was involuntary for purposes of claiming the payroll tax credit, the IRS will not challenge that determination so long as it is consistent with a "reasonable interpretation of the applicable statutory provisions and IRS guidance." The IRS Q&A adds that the employer is required to maintain supporting documentation of its determination that the employee's termination of employment was involuntary, which should include an attestation by the employer of the employee's involuntary termination

Are Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) subject to NJ Continuation ?

No. HRAs are not considered a health plan for NJ Small Group. HSAs are a savings account, not a health plan.

What are the notification requirements ?

The employer is obligated to provide a notice to the employee at the time of the qualifying event. This must include a due date and amount of premium that is due.

There is no obligation to provide a notice to covered dependents (different from Federal COBRA Law).

The terminated individual must elect continuation within 30 days of the loss of coverage

In order to comply with the 2010 Defense Appropriations Act extension of ARRA, the NJ DoBI has just released a bulletin dated 1-6-2010 (available in our forms section) advising CARRIERS of the following:

Carriers should mail the amended notice and forms upon receipt of information that an employee has been terminated.

AEIs whose premium reduction has expired as well as AEIs currently entitled to the premium reduction must immediately be sent the following:

• New Jersey Continuation Coverage Extension of Premium Reduction
• Request for Additional Six Months of Premium Reduction for New Jersey Continuation Coverage

In order for AEIs to be in a position to reinstate coverage they may have dropped within a meaningful timeframe, it will be most helpful if carriers can very quickly send information, particularly to those whose period for premium reduction expired December 31, 2009 and earlier.

Note that the Request for Additional Six Months of Premium Reduction Form has a space for carriers to specify a mailing address at the carrier. While continuation elections and premiums generally pass through the former employer, this extension of the premium reduction is unique. Since carriers advance the 65% premium reduction for the AEIs and it is imperative that AEIs whose premium reduction expired can be reinstated as quickly as possible, the extension paperwork and payment will flow directly from the AEI back to the carrier.

The AEI may also elect a plan of same or lesser premium that the employer may offer to active at work individuals. The alternate plan may differ from what the individual had when terminated.

What is the election period ?

The eligible individual must elect continuation within 30 days from the loss of coverage date.

See Q&A # 9 for a list of qualifying events.

Note: Federal COBRA is 60 days from the qualifying event or date of notice, whichever is later. Note this differs from NJ Continuation.

See Bulletin 09-04.

Payment is due within 30 days of the election date.

The NJ DoBI has released SEH Bulletin 10-01 (found in our forms section) regarding the premium subsidy extension to terminations through February 28, 2010 and for a maximum of 15 months (from 9 months). NJ is complying with the Temporary Extension Act signed March 3, 2010 whereby persons losing coverage due to involuntary terminations through March 31 may be eligible for subsidy. See SEH Bulletin 10-02. On March 17, 2010, the Continuing Extension Act was signed which extends qualifying events through April 30, 2010.

Carriers should mail the amended notice and forms upon receipt of information that an employee has been terminated.

AEIs whose premium reduction has expired as well as AEIs currently entitled to the premium reduction must immediately be sent the following:

• New Jersey Continuation Coverage Extension of Premium Reduction
• Request for Additional Six Months of Premium Reduction for New Jersey Continuation Coverage

Note that the Request for Additional Six Months of Premium Reduction Form has a space for carriers to specify a mailing address at the carrier. While continuation elections and premiums generally pass through the former employer, this extension of the premium reduction is unique. Since carriers advance the 65% premium reduction for the AEIs and it is imperative that AEIs whose premium reduction expired can be reinstated as quickly as possible, the extension paperwork and payment will flow directly from the AEI back to the carrier.

How long may an employee/ dependent continue ?

Employees who terminated for other than cause or whose hours are reduced to below 25 hours have the expanded benefit of continuation up to 18 months.

Employees who were involuntarily terminated between September 1, 2008 and May 31, 2010 are Assistance Eligible Individuals. The subsidy is for a maximum of 15 months and ends if the Assistance Eligible Individual 1- becomes eligible for any other group health plan, 2- eligible for Medicare, or 3- the 18 months has expired. Each termination event would qualify the AEI for a 15 month subsidy.

Example: Involuntarily terminated (IT’d) October 1, 2008. Subsidy starts March 1, 2009. Person gets a job with benefits May 1, 2009. Person is laid off October 1, 2009. They are once again eligible for a full 15 months subsidy even though they used 2 months (March and April 2009). This is assuming the income is below $125k and s/he is not eligible for any other group plan or Medicare.
Failure to notify the employer of any of these events subjects the individual to a fine of 110% of the subsidy.
See here for more detail http://www.savoyassociates.com/newsdetail.aspx?id=2019

The employee's death or divorce allows dependents to continue for 36 months. Dependent children who "age out" or who are no longer fulltime students may continue for 36 months. Adult Children covered under the parent/ employee plan pursuant to Chapter 375 do not have continuation rights unless the parent / employee has a qualifying event and elects continuation, The Adult Child may remain covered for 18 months as long as the parent remains insured. Members who become eligible for Medicare disability may extend continuation from 18 to 29 months.

Reservists may continue for 24 months.

Must continuation be offered to persons eligible or enrolled in Medicare at the time of a qualifying event ?

Yes. Continuation must be offered. Conversely, NJ Continuation ceases if the individual becomes eligible or enrolled into Medicare while covered under continuation.

Keep in mind that regardless of the TEFRA status of the group, Medicare is always primary once the individual is no longer employed.

The premium subsidy under The American Recovery & Reinvestment Act of 2009 ceases when the Assistance Eligible Individual becomes eligible for Medicare.

Who pays the premium and how much ?

Continuees pay 100% (the total employer and employee contribution) of the premium plus the employer may charge an additional 2% surcharge (same as Federal COBRA).

Employers may charge 150% of the total premium rate for those who extend coverage to 29 months due to Medicare disability.

Employees who were involuntarily terminated other than for cause between September 1, 2008 and March 31, 2010 may be eligible for a subsidy of 65% of the NJ Continuation premium. The Assistance Eligible Individual pays the employer 35% of the total continuation premium. The carrier subsidizes the 65% and the carrier is reimbursed via payroll taxes on their Form 941.

What coverage must be allowed to be continued ?

Medical coverage in force at the time of the qualifying event must be allowed to be continued. The continuee may not change to another plan offered by the employer unless s/he moves out of the plan service area.

Under The American Recovery & Reinvestment Act of 2009, employer groups subject to Federal COBRA may permit the Assistance Eligible Individual to elect a plan of lesser premium that the employer may have in place. However for employer groups subject to NJ State Continuation, the employer MUST permit the AEI to select a plan of lesser premium, if one exists. Continuation is NOT extended to the continuation of Dental.

There may be carriers that permit the continuation of dental coverage but this is not required.

Are church groups eligible ?

Yes, for NJ Continuation.

Note: they are not eligible under Federal COBRA.

What are the qualifying events for continuation ?

Termination of employment for other than cause OR a reduction of hours to below 25 (differs from Federal COBRA).

up to 18 months.
Employees who were involuntarily terminated between September 1, 2008 and March 31, 2010 may be Assistance Eligible Individuals via the Continuing Extension Act signed March 17, 2010. They and their families may continue up to 15 months with a subsidy. The subsidy is for a maximum of 15 months and ends if the Assistance Eligible Individual 1- becomes eligible for any other group health plan, 2- eligible for Medicare, or 3- the 18 months has expired. Failure to notify the employer of any of these events subjects the individual to a fine of 110% of the subsidy.

See here for more detail http://www.savoyassociates.com/newsdetail.aspx?id=2019

Spouses and dependents can continue with the employee or have their own right(s) if the employee dies, divorces the spouse or for dependents when they no longer qualify due to age, marriage or no longer qualify as a fulltime student.

An employee's enrollment onto Medicare who terminates off the group health plan does NOT create an event for spouse/children (as it does for Federal COBRA).

Note: continuation is not available to Adult Children who are no longer eligible under this law. However if the parent/employee elects continuation the Adult Child(ren) may continue as well.

Are Civil Union and Domestic Partners eligible for NJ Continuation rights ?

NJ Small Group contracts define Civil Union and Domestic Partners as spouses. As such they are eligible for NJ Continuation rights.

However, under The American Recovery & Reinvestment Act of 2009, there is no Federal subsidy for such partners.

What employees are eligible ?

Any employee or dependent covered by a NJ fully insured contract regardless of where they live or work and regardless of how long they were on the health plan (even one day).

Keep in mind that the plan may no longer accommodate the member who moves out of the service area as in an HMO. The employer is not obligated to create another plan for the Continuee.

Can employees or dependents add and / or delete dependents ?

If the employer selected an employee and dependent contract when the plan was written, only newly acquired dependents of the former employee can be added.

Note: parent/employees who elect continuation may include their Adult Child(ren) for 18 months of coverage. However Adult Children who become ineligible under the Adult Child law may not elect continuation on their own.

Where can I obtain further information ?

SEH Bulletin 10-03 regarding the extension of the subsidy for involuntary terminations through May 31, 2010 under the continuing Extension Act (CEA). An updated FAQ as it relates to NJ State Continuation can be found here http://www.state.nj.us/dobi/division_insurance/arra.html#priortofeb09

Appeal Rights: Individuals have a right to appeal the denial of the subsidy to the U.S. Department of Health and Human Services. Health and Human Services is working on the process for an appeal and an appeal form. Additionally, you may contact the New Jersey Department of Labor and Workforce Development, Division of Wage and Hour Compliance, in writing at P.O. Box 389, Trenton, NJ 08625-0389, by telephone at (609) 292-1704 or via e-mail at wage.hour@dol.state.nj.us.

You may also contact Joan Fusco, Director, Research & Education at joanfusco@savoyassociates.com. Her cellular number is 848-391-3700.