So yesterday, I made a convincing case that employees who smoke outside the workplace can’t be treated differently than your non-smokers. 

But what about your health insurance plans? Doesn’t the state law prohibit your plan from imposing higher premium costs on those smokers?

Well on first glance it appears yes.  The state law would seem to apply.

But, dig deeper (and without getting too technical) and you’ll understand that there is a federal law — ERISA — that trumps that state law when it comes to insurance plans. 

Indeed, back in 2006, the Office of Legislative Research (one of the underappreciated government offices) wrote a report that said exactly that:

You asked if Connecticut law prohibits insurers or employers from factoring in whether a person smokes when determining insurance premiums or employee contributions for health care benefits. …

Connecticut law prohibits employers from discriminating against any individual who smokes outside the workplace with respect to compensation, terms, conditions, or privileges of employment (CGS § 31-40s). The Connecticut Department of Labor (DOL) interprets this law as not prohibiting an employer from having smokers contribute more toward health benefits than non-smokers due to preemption by the federal Employee Retirement Income Security Act (ERISA). To our knowledge, this issue has not been litigated in a Connecticut court. …

Since that time, the question remains undecided, but there is little reason to doubt the conclusion. Indeed, there’s much more to this area than a simple blog post can provide.  But employers who believe in healthy workplaces and want to keep their insurance premiums down do have a small arrow in their quiver to make it happen.


This week, both the Hartford Courant and the Hartford Business Journal,  have run lengthy articles suggesting that the COBRA subsidy — which went into effect in February of this year — is coming to end for most workers. 

Unfortunately, the articles miss the big picture of the law and, in doing so, add to the confusion surrounding the law.

So, let’s take a moment to understand the context.

Before February 2009, laid off workers who wished to continue their health benefits had an option to do so but typically by paying the full amount of the premiums. They could do so under the law known as COBRA.

Then in February 2009, Congress passed a law that provided that workers laid off between September 1, 2008 and December 31, 2009, would be eligible to receive a subsidy from the government, in which the government would pay 65 percent of the premium for a nine month period.  This is what’s been known as the "COBRA Subsidy".

So, this month, some workers who were laid off between September 1, 2008 and March 1, 2009 and who had been receiving this subsidy from the government, will lose that subsidy.  They will not lose their insurance; rather, they will revert to the existing COBRA law for coverage.

Nevertheless, the articles suggest that the benefits are ending for other laid off employees as well. That is not the case. Anyone who is laid-off through the end of 2009 may still be eligible to receive the nine-months of subsidies (and employers will still be responsible for processing such requests) so long as their are COBRA-eligible. At the end of each nine-month period, they can continue their health insurance benefits at the full premium rates.  The DOL has issued FAQ on the subject which you can find here.

[Note that if an laid off employee still has health insurance coverage through, say January 31, 2010 under an existing policy of the employer, then COBRA would not start until that time and the laid off employee would not be eligible for the subsidy.]

It is unclear, at this point, whether Congress will extend this subsidy any further. A bill has been introduced to do so but its prospects remain foggy.

What’s also unclear is how many individuals are actually using the COBRA subsidy.  An estimate before the bill suggested that up to 7 million people would be eligible, but the numbers on the actual amount of people using the subsidy have yet to be released by the government.  

For employers, absent passage of another extension, the next several months are likely to be another confusing time. 

Employees who were laid off before December 31, 2009 and who are otherwise COBRA-eligible may continue getting the subsidy, but those laid off after December 31, 2009 (or those who are not COBRA-eligible until after December 31, 2009) will not.  As such, employers will need to amend their COBRA notices and forms yet again to revert back to the former forms that they used before the subsidy.