Thursday, March 26, 2009

Applying the federal COBRA subsidy to Ohio’s Mini-COBRA law

As I’ve previously reported, the federal stimulus bill, enacted last month, requires employers to provide a 65% subsidy of COBRA premiums for employees involuntarily separated. As I’ve also previously reported, Ohio has its own “mini-COBRA” for small employers with between 10 and 19 employees.

Do not assume, however, that merely because COBRA does not apply to small businesses that the subsidy also does not apply to small businesses. The federal stimulus bill specifically provides for COBRA premium assistance to former employees covered under state continuation coverage law such as Ohio’s mini-COBRA.

Just like its federal counterpart, small employers covered by Ohio’s mini-COBRA are not obligated to pay any portion of the premium. The former employee will pay 35% of the premium and employer will claim the payroll tax credit from the IRS for the 65% of the premium not paid by the former employee.

There are, however, three key differences between the subsidy under COBRA versus Ohio’s mini-COBRA.

  1. Although the federal subsidy lasts for 9 months, Ohio continuation coverage, and therefore the subsidy obligation, only extends for 6 months.

  2. To be eligible for the subsidy under COBRA, an employee need only have been involuntarily terminated for a reason other than gross misconduct. To be eligible for the subsidy under Ohio’s mini-COBRA, the employee must have been involuntarily terminated and: (i) continuously insured for the 3 months prior to the termination; (ii) eligible for unemployment; and (iii) not covered or eligible for Medicare or any other group health coverage.

  3. Under COBRA, the federal subsidy is retroactive to September 1, 2008. In comparison, Ohio’s mini-COBRA only covers terminations that occur on or after February 17, 2009. Both subsidies expire at the end of this year.

The Ohio Department of Insurance has published a model COBRA notice for small employers to use.

Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or