New York Gov. David A. Paterson is proposing legislation to ensure that eligible workers laid off by small businesses can access subsidized health coverage.

David Paterson

Paterson’s bill will ensure that these New Yorkers qualify for federal benefits that pay up to 65% of Consolidated Omnibus Budget Reconciliation Act (COBRA) health insurance premiums.

A subsidy through the American Recovery and Reinvestment Act (ARRA), commonly known as the federal stimulus package, is available to individuals terminated on or after Sept. 1, 2008, but a change in New York law is needed to include those working for small businesses.

Paterson called the federal subsidy “a significant step in the right direction” to expanding access to affordable health insurance for all state residents, but “the need to pass this bill is urgent because we must ensure as many people as possible retain their health coverage.”

“One of the greatest challenges facing the state as a result of the current economic crisis is how we help unemployed New Yorkers retain access to their health insurance,” Paterson said in a statement. “Given the record levels of unemployment announced just last week, we need to move quickly to amend state law to make this subsidy available to as many New Yorkers as possible.”

Through COBRA, workers and their families who lose health benefits through their employer can continue group health benefits for a limited time period. Under federal law, COBRA generally applies to employers with 20 or more employees, while those businesses who have fewer than 20 employees are required to offer the same continuation coverage under New York’s “mini-COBRA” law.

The national recovery plan makes a subsidy available for up to 65% of the cost of COBRA health insurance premiums. The subsidy is available for up to nine months and administered through a payroll tax credit, meaning that individuals with COBRA coverage will be responsible for no more than 35% of premiums.

For those who lost their jobs after Sept. 1, 2008, and before the ARRA was enacted and who did not initially elect to enroll in COBRA, the recover package provides a “special election period” during which they can enroll for COBRA coverage.

The ARRA did not, however, extend that period for those under New York’s “mini-COBRA” continuation law, so Paterson’s bill will seek to create such a period for those formerly employed by small businesses as a second chance to elect for coverage.

“The Governor’s bill will give employees of small businesses the same access to federal economic recovery funds as employees of big businesses,” Superintendent of Insurance Eric Dinallo said in a statement. “There is no downside. We must ensure that all New Yorkers who lose their jobs have the ability to access the federal subsidy for health insurance.”