Erisa Preemption of Connecticut Statutes Providing for Continuation of Health Care Coverage
| Jurisdiction | Connecticut,United States,Federal |
| Publication year | 2021 |
| Citation | Vol. 64 Pg. 191 |
| Pages | 191 |
64 CBJ 191. ERISA PREEMPTION OF CONNECTICUT STATUTES PROVIDING FOR CONTINUATION OF HEALTH CARE COVERAGE
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The Employee Retirement Income Security Act of 1974 ("ERISA"),(fn1) signed by President Ford on September 12, 1974, ushered in a new age of federal regulation of private employee benefit plans. ERISA is a comprehensive statute designed to safeguard the benefits provided under employee benefit plans by subjecting such plans to uniform federal standards.(fn2) Nevertheless, because the states, to varying degrees, have also sought to continue to regulate employee benefit plans, ERISA, and in particular its preemption provision,(fn3) has proven to be a source of dispute in courtrooms across the country.
ERISA regulates both employee pension benefit plans and employee welfare benefit plans. The terms "employee pension benefit plan"(fn4) and "employee welfare benefit plan"(fn5) are specifically defined in the statute. In general, an employee pension benefit plan provides retirement benefits and certain other types of deferred compensation. An employee welfare benefit plan provides other types of benefits such as health care, disability benefits, and life insurance. In this article, we are concerned only with employee welfare benefit plans, particularly those that provide health care benefits.
The Connecticut General Statutes contain a number of provisions that directly or indirectly regulate employee welfare benefit plans maintained by Connecticut employers. The enforceability of these statutory provisions is questionable in light of ERISA's broad preemptive effect. In this article we argue that,
with very specific exceptions, those provisions of the Connecticut General Statutes that purport to regulate employee health care plans subject to ERISA are preempted and, therefore, are unenforceable.
I. ERISA's REGULATION OF EMPLOYEE WELFARE BENEFIT PLANS
ERISA does not require that employers provide welfare benefit plans to their employees; rather, it regulates plans that employers voluntarily establish to provide benefits to current or former employees. ERISA applies to employee welfare benefit plans established or maintained by private employers or unions engaged in interstate commerce or in an activity affecting interstate commerce.(fn6) Government plans, church plans, plans established solely for the purpose of complying with workmen's compensation, unemployment or disability insurance laws, and un-funded excess benefit plans are not subject to ERISA.(fn7)
ERISA's application cannot be avoided merely by failing to commit a plan to writing; unwritten policies and oral statements made to employees may create obligations under ERISA.(fn8)
A. The COBRA Amendments
1. The Right to Continued Coverage. Until recently, ERISA did not regulate the substantive provisions of employee welfare benefit plans. ERISA was silent as to what benefits were to be provided and how benefits were to be provided. However, provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 and the Tax Reform Act of 1986 (collectively referred to herein as "COBRA")(fn9) amended ERISA to require that certain employer-provided group health plans(fn10) subject to ERISA(fn11) must
offer to covered persons ("qualified beneficiaries") the right to extend coverage, at group rates, beyond the date when such coverage would normally terminate because of the occurrence of certain events ("qualifying events"). The COBRA provisions are generally applicable for plan years beginning on or after July 1, 1986. (fn12)
COBRA requires that qualified beneficiaries be given the opportunity to extend the coverage that they had under a health plan immediately prior to a qualifying event. "Qualifying events" are any of the following events, if the event would normally cause a covered employee or his covered dependents to lose coverage under the plan: (1) termination of a covered employee's employment for any reason except gross misconduct; (2) reduction in the hours of a covered employee's employment; (3) death of a covered employee; (4) divorce of a covered employee; (5) legal separation of a covered employee; (6) eligibility for Medicare; or (7) a termination of dependent child status under the health plan.(fn13)
In the case of termination of a covered employee's employment or a reduction in such employee's hours, qualified beneficiaries who would normally lose coverage under the health plan may elect to continue their coverage for up to 18 months following the date of the qualifying event. Coverage may be continued for up to 36 months following the date of occurrence of any of the other qualifying events. In the case of termination of employment or reduction in hours where continuation coverage is elected, the period of coverage may be extended from IS months to 36 months if a second qualifying event occurs within the first 18 months of continued coverage.(fn14)
Qualified beneficiaries must be given the same coverage as other similarly situated persons covered under the group health plan. Changes in the coverage of similarly situated covered employees and their dependents must be reflected in the coverage provided to qualified beneficiaries.(fn15) Each qualified beneficiary has an independent choice of continuation coverage. Thus, some qualified beneficiaries within a covered family may elect continuation coverage while others decline such coverage.(fn16)
Employers must notify employees of their right to COBRA coverage in the health care plan's summary plan description or by separate written notice. Employees or their families must affirmatively elect COBRA coverage within an election period of not less than 60 days.(fn17) Employers may charge a premium for COBRA coverage that is not greater than 102 percent of the cost to the plan for such coverage for similarly situated persons with respect to whom a qualifying event has not occurred.(fn18)
On December 19, 1989 President Bush signed the Omnibus Budget Reconciliation Act of 1989(fn19) (referred to hereinafter as the -1989 Act"). The 1989 Act contains a number of provisions affecting the continued health care coverage requirements of COBRA.
The 1989 Act extends the maximum period of continued coverage from 18 months to 29 months for beneficiaries who have
been determined to be disabled under Title 11 or XVI of the Social Security Act at the date of the qualifying event, and have provided notice of such determination to the plan administrator prior to the end of the initial 18 month period.(fn20) However, plan sponsors are allowed to raise the premium charged for the 19th through 29tb months to 150 percent of cost rather than the 102 percent that plan sponsors are allowed to charge during the first 18 months.(fn21) If the beneficiary is determined to be no longer disabled for Social Security purposes, the beneficiary is required to notify the plan administrator within 30 days of such a determination.(fn22) This provision is effective for plan years beginning on or after 21 December 19, 1989.(fn23)
The 1989 Act provisions also maintain COBRA continued coverage obligations on employers even if beneficiaries become covered under new plans of another employee where such plans do not provide coverage for preexisting conditions.(fn24) This provision is effective for qualifying events occurring after December 31, 1989.(fn25) Partners, self-employed individuals and independent contractors covered under a group health plan are to be included in the definition of "covered employee" and thus will be entitled to COBRA coverage, for plan years beginning after December 31, 1989.(fn26) The 1989 Act also extends the COBRA coverage period for dependents of employees when the employees become eligible for Medicare.(fn27)
2. Sanctions. Under ERISA a plan participant or beneficiary may bring a civil action to enforce his right to continued coverage under a group health plan subject to COBRA or to enforce against a plan administrator certain penalties for failing to comply with COBRA's requirements.(fn28) In addition, the Internal Revenue Code (fn29) has been amended to provide a sanction, in the form of an excise tax, applicable to failures to comply with COBRA.(fn30) The excise
tax is intended to mirror an employer's violation since the amount of the tax is based on the extent of the violation.
Failure to comply with COBRA may result in the imposition of a tax in the amount of $100 for each day in the "noncompliance period" for each qualifying beneficiary with respect to whom the plan is not in compliance.(fn31) Where a qualifying event affects two or more related qualified beneficiaries - for example, a widowed spouse and dependent children - the maximum tax for all failures on any day is $200 per day with respect to all such qualified beneficiaries.(fn32) The noncompliance period begins on the date the failure first occurs and ends on the earlier of (a) the date the failure is corrected or (b) the date which is 6 months after the last day of the continuation period applicable to the qualified beneficiary.(fn33) The penalty tax is assessed against an employer for a failure of a single employer plan sponsored by such employer. In the case of multiemployer plans, the tax may be assessed against the employer or against an administrator other than the employer, presumably on the basis of which party is actually responsible for administering the plan. Employers that are required to pay the tax because of failures of multiemployer plans are assessed penalties as if they participated in single-employer plans. The maximum tax that may be imposed upon an employer for an unintentional plan...
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