Attorney General: Robert R. Googins, Commissioner, Department of Insurance, 1993-005 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

March 24, 1993

Robert R. Googins, Commissioner
Department of Insurance
165 Capitol Avenue
Hartford, CT 06106

Dear Commissioner Googins:

You have requested our advice on several questions related to 1992 Conn. Public Act 92-158, An Act Concerning Extending Continuation Benefits to the Unemployed (hereinafter "Public Act 92-158"). Public Act 92-158 amended Conn. Gen. Stat. e 38a-538, which requires employers to offer employees whose employment has terminated for reasons other than death the option to purchase continued health insurance coverage under the employer's group health plan at the same group rate. Public Act 92-158 extended the time period for such continuation coverage from 78 weeks to 104 weeks.

Your questions concern the applicability of Public Act 92-158 in light of the continuation coverage requirements contained in federal law. The Employees Retirement Income Security Act of 1974 ("ERISA") 29 U.S.C. e 1001, et seq. was amended in 1985 by Public Law 99-272 (the "COBRA" amendments) to require all employers of 20 or more employees who maintain a group health plan to offer employees whose employment terminates the option to purchase continued coverage under the group plan. Currently, under the COBRA amendments, federal law requires that employees whose employment has terminated for reasons other than death or gross misconduct be given the option to extend coverage for eighteen months.

Your questions are addressed in the order presented in your letter.

1. Does Public Act 92-158 apply to employers with less than 20 employees who maintain group health insurance plans or does ERISA operate to preempt application of Public Act 92-158 to such employers?

ERISA regulates employee benefit plans established or maintained by employers or employee organizations, with certain exceptions.1 Included in the definition of employee benefit plans are plans in which employers provide health benefits to employees.2 ERISA contains a broad preemption provision, which states that the statute shall "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. e 1144(a). (Emphasis added). However, the preemption provision is qualified by the "insurance savings clause" which states that nothing in ERISA "shall be construed to exempt or relieve any person from any law of any state which regulates insurance, banking, or securities." 29 U.S.C. e 1144(b)(2)(A). To answer your first question, we must determine whether Conn. Gen. Stat. e 38a-538 as amended by Public Act 92-158 is a law that "relates to" an employee benefit plan, and if so, whether it escapes preemption as a law regulating insurance.

In Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), the United States Supreme Court discussed the breadth of ERISA's preemption provision. The court stated that "[a] law relates to an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Id. at 96-97. The legislative history of the preemption provision indicates that Congress intended to reserve to the federal government the power to regulate employee benefit plans and to displace all state laws that fall within its sphere, whether consistent or inconsistent with ERISA's substantive requirements. Id. at 98-99. See also Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 739 (1985). The court recently reaffirmed that the words "relate to" are to be interpreted broadly. District of Columbia v. Greater Washington Board of Trade, ____ U.S. ____, 61 USLW 4039 (Dec. 14, 1992).

Conn. Gen. Stat. e 38a-538, as amended by Public Act 92-158, is a state law that relates to an employee benefit plan. Subsection (a) states in part

(a) Whenever any individual who is a member of any group health insurance plan becomes ineligible for continued participation in such plan for any reason including death or whenever any individual who is a spouse of a member becomes ineligible for continued coverage as a dependent under such plan as a result of dissolution of marriage, all benefits of such plan, except disability income coverage, shall be made available by the employer at the same group rate (1) to the individual and the dependents covered by the group plan, upon the termination of the individual's employment other than as a result of his death, for an extension period of [seventy-eight] ONE HUNDRED AND FOUR weeks ...

This law affects all group health plans made available by employers in that it requires the plans to provide for continued coverage for employees whose coverage would have been discontinued but for the law. Thus, this law is preempted by ERISA unless it also is a law that regulates insurance.

The United States Supreme Court discussed the scope of the insurance savings clause in the Metropolitan Life case, identifying three relevant criteria to determine whether a statute regulates insurance.

[F]irst, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.

471 U.S. at 743.

While the continuation coverage provision in Conn. Gen. Stat. e 38a-538 meets the first criterion of spreading a policyholder's risk, the second and third criteria are absent. The statute requires employers to provide a particular benefit to its employees, and applies whether the plan is insured or not. Thus, it primarily regulates the relationship between the employer and employee, not insurer and insured.3 In addition, its requirements are imposed on employers, not insurers and, therefore, the statute does not meet the third criterion.4 Since Conn. Gen. Stat. e 38a-538 is not a law regulating insurance, it is preempted by ERISA. The effect of the ERISA preemption is that Conn. Gen. Stat. e 38a-538, as amended by Pub. Act No. 92-158, is superseded as to all ERISA plans,5 regardless of the number of employees employed by an employer. Federal law controls the issue of continuation coverage requirements for ERISA plans, and therefore, only employers of 20 or more employees are required to offer continuation coverage to their employees.

2. May Public Act 92-158 be applied to employers with 20 or more employees who maintain group health insurance plans?

Since ERISA preempts the Connecticut statute's application to ERISA plans, employers of 20 or more employees who maintain group health plans may not be required to follow any of the provisions of e 38a-538, as amended by Public Act 92-158.

3. If the answer to item 2) is yes, does Public Act 92-158 require an employer with 20 or more employees who maintains a group health insurance plan to offer an employee who is entitled under ERISA to a COBRA extension the choice of continuing coverage under Public Act 92-158 in lieu of extending coverage under COBRA?

Since ERISA preempts state law, no employer who maintains an ERISA plan is required to offer his employees who are terminated a choice between the continuation coverage provisions of ERISA and those of state law. The continuation coverage provisions of ERISA are the only provisions such employer is required to follow and to offer his employees. Therefore, the answer to your question is no.

4. If the answer to item 3) is yes, and an employer must offer individuals a choice between continuation under Public Act 92-158 and a COBRA extension, will the continuation or extension, which ever is chosen, be governed exclusively by Public Act 92-158 or ERISA respectively, or may the individual claim the benefit of any provision in either law that offers him or her more favorable treatment as to a particular term?

See our response to question (3).

5. If the answer to item 2) is yes, does Public Act 92-158 require an employer with 20 or more employees who maintains a group health insurance plan to offer a right to continue coverage under Public Act 92-158 to an employee who is not entitled to a COBRA extension?

See our response to question (3).

6. Must employers who are subject to Public Act 92-158 offer continuation of coverage in compliance with that Act to persons who, prior to the effective date of the Act, elected to continue coverage under Conn. Gen. Stat. e 38a-538?

7. If the answer to item 3) is yes, must employers who are required to offer employees the choice of continuing coverage under Public Act 92-158 in lieu of extending coverage under COBRA offer a continuation under the Act to persons who, prior to the Act's effective date, elected to extend coverage under COBRA?

8. If the answer to item 6) or 7) is yes, may employers meet their obligation to offer continuation of coverage to persons already on continuation of extension by allowing individuals to continue or extend coverage for a total of 104 weeks or must employers permit those individuals to elect an additional continuation period of 104 weeks, to begin on the effective date of Public Act 92-158 or, alternatively, at the expiration of their initial period of continuation or extension?

Essentially questions (6), (7) and (8) break down into two parts: (1) does Public Act 92-158 apply to persons who already had elected to continue their coverage under e 38a-538 prior to the passage of the public act and are in such continuation period; and if so (2) for how much additional time are they eligible for coverage. Since these questions deal with the Connecticut statute, our response is applicable to non-ERISA plans only.

In extending the period of continuation coverage available to terminated employees and their dependents from 78 weeks to 104 weeks, Public Act 92-158 contains no specific language regarding whether the extended coverage period applies to persons who had already elected continuation coverage under the existing law. However, the legislative history indicates that the act was intended to apply to such persons. In the House of Representatives debate on the bill, it was stated that the extended coverage period was intended to help the unemployed through the present difficult economic times. Rep. Gabriel Biafore, the bill's sponsor, stated "... with the highest unemployment rate in probably New England, I would think there is a definite need to do this so that people could at least be able to keep what insurance coverage they have now for an extended six month period of time." 1992 H.R. Proc. 578 (May 5, 1992). Unless the act is construed to apply to persons who have already elected continuation coverage, it does not achieve its purpose to help the presently unemployed. In addition, since an employee electing continuation coverage must pay the cost of such coverage, this act does not impose a new obligation on the employer which would prevent it from being applied retrospectively. See Conn. Gen. Stat. e 55-3. Therefore, it is our opinion that the act does apply to persons that have already elected continuation coverage and are in such continuation period.

The act as amended requires employers to offer terminated employees a continuation coverage period of 104 weeks. Under the old law, the coverage period was 78 weeks. Therefore, employees who elected continuation coverage under the old law are entitled to an additional 26 weeks of coverage. The additional 26 weeks begin at the expiration of their initial 78 week continuation period.

9. Public Act 92-158, which does not specify an effective date, was signed by the Governor on May 27, 1992. Section 69 of Public Act 92-11 of the May Session provides that Public Act 92-158 shall take effect from its passage. Public Act 92-11 of the May Session was signed by the Governor on June 1, 1992. Is the effective date of Public Act 92-158 May 27, June 1 or October 1, 1992?

Conn. Gen. Stat. e 2-32 sets forth the rule governing the effective dates of public and special acts: "Effective date of public and special acts. All public acts, except when otherwise therein specified, shall take effect on the first day of October following the session of the general assembly at which they are passed, and special acts, unless otherwise therein provided, from the date of their approval." When initially passed, Public Act 92-158 did not specify an effective date. However, Section 69

of Public Act No. 92-11 May Sess. provides that Public Act 92-158 shall be effective upon passage. Accordingly, under the rule in Conn. Gen. Stat. e 2-32, the effective date of Public Act 92-158 is May 27, 1992, the date that Public Act 92-158 passed.

Very truly yours,

RICHARD BLUMENTHAL
ATTORNEY GENERAL

Shelagh P. McClure
Assistant Attorney General

RB/SPM/db


1 29 U.S.C. e 1003(b) excepts from ERISA's coverage governmental plans, certain church plans, plans maintained solely for the purpose of complying with workmen's compensation laws or unemployment compensation or disability insurance laws, plans maintained outside the United States primarily for non-resident aliens, and unfunded excess benefit plans.

2 29 U.S.C. e 1002(1) defines "employee welfare benefit plan" to include "any plan, fund, or program ... maintained by an employer ... for the purpose of providing its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits ..."

3 Cf. Conn. Gen. Stat. e 38a-546, which requires group health insurance policies delivered or issued for delivery in this state to contain certain continuation coverage provisions. Like e 38a-538 Conn. Gen. Stat. e 38a-546 meets the first criterion set forth in the Metropolitan Life case of spreading the policyholder's risk. Unlike e 38a-538, however, e 38a-546 primarily regulates the relationship between the insurer, who issues policies containing the mandated provisions, and the insured. By requiring all policies issued to contain specific provisions, e 38a-546 imposes its requirements on insurers, not employers. Thus, Conn. Gen. Stat. e 38a-546 meets all three criteria enunciated in Metropolitan Life, and, therefore, would escape ERISA preemption as a law regulating insurance.

4 Cf. e 38a-552(b), which requires that "[e]very carrier offering group health insurance in this state shall, as a condition of transacting such health insurance" offer every employer a comprehensive health care plan that includes continuation coverage provisions. (Emphasis added). This is also a law regulating insurance which would not be preempted by ERISA. Rather than mandating a specific benefit provision like e 38a-546, e 38a-552 requires insurers to sell a specific type of health insurance policy (that covers otherwise "uninsurable" employers or groups) if they wish to transact group health insurance business in Connecticut. These two statutes show there are varying ways to impose continuation coverage requirements that do not run afoul of ERISA's preemption clause.

5 Although governmental plans are exempt from ERISA's coverage, the COBRA amendments also amended the Public Health Service Act to require governmental plans to offer continuation coverage parallel to the requirements for ERISA plans. 42 U.S.C. e 300bb-1 through 8.


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