Date:October 1, 2009
To:All Insurers Authorized to Write Health Insurance in Wisconsin
From:Sean Dilweg, Commissioner of Insurance
Subject:Section Ins 3.75, Wis. Adm. Code, relating to continuing group health insurance coverage for federal assistance eligible individuals under policies discontinued and not replaced on or after June 30, 2009

Summary

The purpose of this memorandum is to summarize the emergency rule requiring health insurers to continue coverage of federal assistance eligible individuals when the group health policy coverage was or would otherwise terminate on or after June 30, 2009. Health insurers are required to exercise due diligence to identify employer group health plans that terminated on or after June 30, 2009, and not replaced, and to ask the employer to provide the required notice to assistance eligible individuals or provide the notice themselves if the employer does not do so within 30 days of the effective date of the rule (October 2, 2009).

Discussion

Effect of the rule:

The emergency rule requires insurers to continue health insurance coverage for involuntarily terminated employees, and their families, when the employer goes out of business or otherwise discontinues, without replacing, group health coverage. The emergency rule applies to all employees, and their families, covered by a group health insurance policy, regardless of whether the employer is a small or large employer consistent with Wisconsin law, s. 632.897, Wis. Stat.

The right to continuation under this rule applies only to individuals who are eligible for the federal 65% premium subsidy available under the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provides a nine-month subsidy for 65% of continuation health insurance premiums for employees involuntarily terminated from their jobs between September 1, 2008, and December 31, 2009. The subsidy is administered through a payroll tax credit. Income limitations apply, with subsidies phasing out for those with annual incomes over $125,000 (single) or $250,000 (married).

Wisconsin law, absent this emergency rule, does not require continuation of coverage when an employer terminates a group health plan and does not replace it. The emergency rule extends the right to continuation of group health insurance policy coverage to a situation where the employer discontinues providing group health insurance to its employees. This right to continuation of coverage is limited to employees, and their families, involuntarily terminated prior to or on the date the group policy is terminated who are eligible for the federal ARRA premium subsidy. The emergency rule extends this continued health insurance coverage right retroactively to involuntarily terminated employees of employers who discontinued a group policy on or after June 30, 2009.

When continued coverage is not required:

Under s. Ins 3.75 (3) (d) of the emergency rule, an insurer is not required to extend continuation of coverage if the individual:

  1. Establishes residence outside this state.
  2. Fails to make timely payment of premium.
  3. Becomes eligible for Medicare or coverage under an employer's group policy.
  4. Ceases to be eligible for the federal ARRA premium assistance, including by exhausting the nine months eligibility period.
  5. Would have ceased to be entitled to continuation of coverage under s. 632.897, Wis. Stat., if the group policy had not been discontinued.

Notice:

Under s. Ins 3.75 (4), notice of the right to continued coverage, including the right to the ARRA premium subsidy, must be given to the involuntarily terminated employee. The emergency rule requires the employer to give the notice prior to termination of the group policy, or by November 1, 2009, if the group policy was discontinued prior to the effective date of the rule and on or after June 30, 2009. An insurer is required to give the notice to an involuntarily terminated insured within 10 days after the insurer, acting with due diligence, determines or should have determined that the employer has not given the required notice. OCI has posted a suggested form for the notice on its Web site (http://oci.wi.gov/bulletin/1009ins375attacha.pdf (opens in new window)).

Election:

An assistance eligible insured may elect continuation of coverage for the insured and their dependents within 30 days after receiving notice and paying the necessary premium.

Premium:

An insurer may charge the terminated insured 35% of the cost the employer incurred to provide the coverage. The insurer may direct the terminated insured to either pay the premium to the employer or directly to the insurer. If the insurer directs that the premium be paid to the employer, the premium is deemed paid when received by the employer. The insurer may collect the remaining 65% of the premium from the federal premium subsidy.

Administration of the ARRA premium subsidy:

The federal agencies that administer ARRA have addressed several issues regarding the federal ARRA premium subsidy, including:

  • Continuation of coverage after the employer has gone out of business and the employer's group health plan has been terminated is "COBRA continuation" coverage and eligible for the federal premium subsidy (see the IRS fact sheet, Q and A, AE-27 at the following link: http://www.irs.gov/newsroom/article/0,,id=205364,00.html).
  • The insurer may collect the federal premium subsidy for assistance eligible individuals (see IRS fact sheet, Q and A, RD-4 at the following link: http://www.irs.gov/newsroom/article/0,,id=205376,00.html).
  • The insurer may rely on the employee's attestation of eligibility when the employer is unavailable (employer approval need not be documented) as adequate audit documentation for collection of the premium subsidy (see the IRS fact sheet, Q and A, RD-11 at the following link: http://www.irs.gov/newsroom/article/0,,id=205376,00.html).

This memorandum is a summary of the emergency rule. A copy of the full text of the rule can be obtained from the Web site at: http://oci.wi.gov/ocirules.htm and a suggested notice form for use under the emergency rule can be obtained at: http://oci.wi.gov/bulletin/1009ins375attacha.pdf (opens in new window) or by contacting Inger Williams, Public Information and Communications, at:

Phone:(608) 264-8110
E-mail:inger.williams@wisconsin.gov
Address:125 South Webster St., 2nd Floor, Madison WI 53703
Mail:P.O. Box 7873, Madison, WI 53707-7873


Questions concerning the requirements of s. Ins 3.75 can be e-mailed to:

Mike Honeck
Chief of Health & Life Section
mike.honeck@wisconsin.gov