The federal Consolidated Omnibus Budget Reconciliation Act ("COBRA") allows employees of "qualified employers"—those employers having 20 or more employees—to continue the health insurance they get from the employer's group plan under specific circumstances like termination or death. For those Nebraska employers who feel relieved because they have fewer than 20 employees, there is some bad news. Under Nebraska law, Neb. Rev. Stat. § 44-1640 et seq., employers with fewer than 20 full-time and full-time equivalent employees have the same obligations as those employers who are covered under COBRA.
What does this mean for Nebraska small business owners?
Under Nebraska law, those employers "not . . . subject to section 4980B of the Internal Revenue Code" must provide the same option for continuing coverage in the event of termination or death of a covered employee. Section 4980B is the 20-employee limit to COBRA. In other words, Nebraska's "Little COBRA" applies to smaller employers to whom COBRA does not apply.
The text of Nebraska's "Little COBRA" law states: "An employer . . . policy or contract delivered or issued for delivery in this state which provides coverage to a group . . . which provides hospital, surgical, or major medical coverage, or any combination of such coverages, on an expense-incurred or service basis by an insurance company or health maintenance organization for employees or their families . . . shall provide that an employee whose [coverage] would otherwise be terminated because of the involuntary termination of employment [or death] of such employee, for reasons other than misconduct in connection with employment, shall be entitled to continue such coverage subject to the provisions of the group policy or contract . . . ."
This means that an employee who dies or is terminated—unless the employee is terminated for misconduct—is entitled to continue his or her coverage and coverage for his or her family under Nebraska's "Little
COBRA" laws.
Depending upon the circumstances under which the employee or employee's surviving spouse is exercising "Little COBRA" rights, the employer is obligated to allow the employee or the employee's surviving spouse to continue coverage pursuant to the statutes. If the employee has been terminated for reasons other than misconduct, the employee is allowed to maintain his or her single or family health coverage, at the employee's expense, until the earliest of the following:
1. 6 months after the coverage would have terminated;
2. The date the employee is eligible for other group coverage;
3. Any month in which the employee elects not to pay the premium;
4. The date the employee converts to an individual or family policy or contract; or
5. The date on which the group plan or HMO agreement is terminated in its entirety.
Upon the death of the employee, the employee's surviving spouse and/or surviving children are entitled to continued coverage under the employer's group plan, until the earliest of the following:
1. The date the surviving spouse or dependents qualify for another coverage;
2. Any month in which the surviving spouse or dependents fail to pay the premium;
3. The date the surviving spouse or dependents convert to an individual or family policy or contract;
4. The date on which the group plan or HMO agreement is terminated in its entirety; or
5. 1 year after the death of the employee.
Also note that as a Nebraska employer, you are required to give 10-days' notice to the employee or the employee's surviving spouse and/or dependents of the right to this continuing coverage. The notice must be sent via certified mail, return receipt requested, and it must contain the statutory requirements in sections 44-1641 or 44-1644, depending upon whether the employee was terminated from employment or died. If the employee elects to continue coverage after termination, the employee has 10 days to send the premium payment to the carrier. In the event of the employee's death, the surviving spouse and/or dependents of the employee have 31 days to make the election to continue coverage and submit the premium payment to the carrier.
For those Nebraska employers who thought they were off the hook because of COBRA's 20-employee minimum, Nebraska law requires you to permit the employee or surviving spouse and dependents to elect to pay for continued coverage. In an ever-changing world of health care reform, it is a good idea to stay in front of these issues.
If you are a Nebraska employer and you have questions about whether you need to offer Cobra benefits to employees, contact Madathil Law Office for a free consultation.
Angela Y. Madathil
Madathil Law Office, LLC
Nebraska Business and Employment Attorney
Serving clients throughout Nebraska.
In Omaha In Lincoln
1625 Farnam Street #830 285 South 68th Street Place, Suite 322
Omaha, NE 68102 Lincoln, NE 68510
T: 402.577.0686
F: 402.415.0635
F: 402.415.0635
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