California COBRA affects Employers with 2 to 19 Employees
An amendment to California COBRA (California Continuation Benefits
Replacement Act) affects health plans issued, renewed, or amended on or after
January 1, 1998. The amendment requires employers with 2-19 employees to offer
continued health care coverage (medical, dental, and vision) to employees and
their dependents who lose coverage through qualifying events similar to Federal
COBRA. Self-insured plans are not affected.
This new regulation is similar to the Federal COBRA regulations in many
respects. However, one significant difference is that the Insurance Company
(Insurer) has the responsibility for notifying qualified beneficiaries and
collecting the premiums. Employers have the responsibility for providing notice
of a qualifying event to the Insurer.
Employers with 20 or more employees are subject to Federal COBRA and the new
Cal-COBRA rules do not apply.However, the prior Cal-COBRA rules
concerning employees age 60+ with five years of service dostill apply
for all groups subject to Federal COBRA.
Definition of Small Employer A small employer that has at least
2, but not more than 19 employees on at least 50% of its working days in the
preceding calendar year. Once this definition is met, the employer becomes
Cal-COBRA mandated on the following January 1.
Notification Requirement Employees are required to
notify their employer or insurer, in writing,within 60 days of the
qualifying event (divorce, legal separation, or a child's loss of dependent
status). Failure to do so will result in loss of eligibility for continuation.
Employers are required to notify the Insurer no later than 31 days after
a qualifying event (termination of employment - except for gross misconduct,
reduction of hours, death of employee).
The Insurer must notify qualified beneficiaries of right to elect
continuation coverage within 14 days of notification from employer.
Initially, the Insurer is responsible for providing a written notice
detailing the new law for all qualified beneficiaries. By January 1, 1999,
the group benefit plan "Evidence of Coverage" certificates or
booklets must contain the full notification of the availability of continuation
coverage and the responsibility of the qualified beneficiary regarding
notification and payment of premiums. The employer must distribute the Evidence
of Coverage to all eligible employees.
Qualifying Events
The death of the covered employee or subscriber
The termination or reduction of hours of the covered employee's or
subscriber's employment except that termination for gross misconduct does not
constitute a qualifying event
Divorce or legal separation of thc covered employee from the covered
employee's spouse
Loss of dependent status by a dependent enrolled in the group benefit plan
With respect to a dependent only, the covered employee's or subscriber's
eligibility for coverage under Medicare
Duration of Continuation Coverage
18 months for termination or reduction of hours [An 11-month
disability extension is available the same as Federal COBRA. If a qualified
beneficiary is determined by Social Security to be disabled within 60 days of a
termination or reduction of hours, the qualified beneficiary's continuation
period is extended from 18 to 29 months.]
36 months for death of employee, divorce/legal separation, loss of
dependent status, Medicare entitlement:
Premiums The Insurer may not charge qualified beneficiaries a
premium that is more than 110% of the applicable premium for a similarly
situated covered employee. The qualified beneficiary must make initial payment
directly to Insurer within 45 days of the date election notice is returned to
Insurer.
Termination of Continuation Coverage Termination of continuation
coverage may occur in the following cases:
Premium non-payment.
Termination by the employer of all its group health plans. [In case of a
plan termination, the Insurer must send notice of termination and individual
conversion information to the continuee no later than 180 days prior to end date
of coverage. In addition, the employer must notify the qualified beneficiary at
least 30 days prior. If the policy is being replaced, the qualified beneficiary
may elect to continue under the replacement policy within 30 days of the
notice.]
Failure of the qualified beneficiary to notify or make elections in a
timely manner.
Qualified beneficiary is covered (not just eligible) under another group
health plan, unless the new plan includes pre-existing condition limitations
pertaining to the qualified beneficiary's condition.
Medicare entitlement.
Conclusions At first glance it appears that the cost of this
legislation will be borne by insurance companies. However, higher insurance
costs will eventually be passed onto employers in the form of higher insurance
premiums, once again increasing the cost of doing business in California. On the
positive side, this could make small companies more attractive to employees and
prospective employees, since small companies now have the same health insurance
protections as large companies.
After January 1, 1999, employees will be notified of Cal-COBRA via the "Evidence
of Coverage" certificates. Until then, it's not clear who has the
responsibility for notifying employees of Cal-COBRA when dependents lose
insurance coverage (e.g. divorce, legal separation, or a child's loss of
dependent status). To be on the safe side, employers should consider posting
notices of Cal-COBRA rights inside the company. Contact your insurance company
for more information.
